Customers choose vegetables at Fushan market in Nanchang, capital of east China's Jiangxi Province, Feb. 26, 2010. China's consumer price index (CPI), a main gauge of inflation, rose 2.7 percent year on year in February, the National Bureau of Statistics announced Thursday. (Xinhua/Li Gang)

China's consumer price index (CPI), a main gauge of inflation, rose 2.7 percent year on year in February, the National Bureau of Statistics (NBS) announced Thursday.

"So far there is no overheating in the economy as the price growth in February was mild," said NBS spokesman Sheng Laiyun at a briefing in Beijing.

"Price rises this year will be moderate and controllable", said Sheng who also forecast the index growth would slow in March due to seasonal factors.

The mild rise was partly caused by a hike in food prices, he said.

"Vegetable and fruit prices were up by 25 percent, accounting for 70 percent of February's inflation," said Yao Jingyuan, chief economist of the NBS.

Food prices rose 6.2 percent year on year last month, with non-food prices rising 1 percent.

The food price hike was partly due to the Lunar New Year holiday falling in February this year, a time when Chinese spend a lot of money on food, alcohol, cigarettes and gifts.

Poor weather with rain and snow also contributed to the food price increase in February, said Sheng.

"The CPI will grow at a lower pace when the weather gets warm," he said.

The CPI in the first two months rose 2.1 percent year on year. The combined data of January and February shows a clearer picture of the inflation status as last year's Lunar New Year fell in January.

China's CPI ended nine months of decline in November last year, when it rose 0.6 percent. In December it rose 1.9 percent, as freezing weather helped push up food prices.

The producer price index (PPI), a major measure of inflation at the wholesale level, rose 5.4 percent in February from a year earlier, up from January's 4.3 percent.

"Given last year's low comparison base, the PPI growth in February was mild," said Sheng.

The figure dropped 4.5 percent in February last year due to the global economic slowdown. It ended 12 months of decline in December last year, up 1.7 percent.

The CPI had risen for four straight months, which triggered inflation expectations and concerns of overheating in the economy.

Customers choose fruits at a market in Shenyang, capital of northeast China's Liaoning Province, March 11, 2010. China's consumer price index (CPI), a main gauge of inflation, rose 2.7 percent year on year in February, the National Bureau of Statistics announced Thursday. (Xinhua/Li Gang)

Liu Mingkang, chairman of the China Banking Regulatory Commission, Wednesday told Xinua that China's CPI could rise slightly, but the chances of inflation being more than moderate were very small.

"Don't panic and be afraid about inflation as the global recovery will be a long, winding and complicated process," he said.

Liu vowed the commission would keep a close eye on the situation so as to properly manage inflationary expectations.

The government has set a target limit of a 3-percent rise in consumer inflation for 2010, said Premier Wen Jiabao last week in his speech to open the annual parliamentary session.

Thursday's NBS data also showed that fixed asset investment rose 26.6 percent in the first two months of the year.

The government has taken actions to ease inflationary pressures by ordering banks to increase their reserve ratios three times since December to curb their lending.

Those measures seem to be working as Thursday's data from the central bank showed new yuan-denominated lending in February stood at 700.1 billion yuan, down by half from January's 1.39 trillion yuan.

The government aims to restrict this year's credit growth to 7.5 trillion yuan as inflation expectations rose after 2009's new loans hit a record 9.59 trillion yuan, almost double that of the previous year.

Liu also promised the commission would ensure every penny of this year's new lending flowed into the real economy.

In other signs of China's strong recovery from the global downturn, Wednesday's customs data showed that exports surged 45.7 percent year on year in February, extending its rebound into the third month.

Industrial output grew 20.7 percent in the first two months, while retail sales of consumer goods were up 17.9 percent.