China’s consumer prices rose at the fastest pace in more than two years, the government said yesterday, following warnings that inflation would likely exceed Beijing’s three per cent target for 2010.

The nation’s consumer price index, a key measure of inflation, rose 4.4 per cent on year in October, compared with 3.6 per cent in September, the National Bureau of Statistics said.

It was the fastest pace since September 2008, the start of the global financial crisis when consumer prices rose 4.6 per cent.

The figure, which was higher than several analyst predictions, comes as Beijing battles to rein in consumer prices and soaring housing costs.

Late Wednesday, the central bank tightened liquidity by ordering banks to set aside more reserves for a fourth time this year.

The People’s Bank of China last month also raised its benchmark one-year lending and deposit rates by 25 basis points each, the first interest rate hike in nearly three years.

China’s battle to keep prices in check comes amid worries that the US Federal Reserve’s move to inject $600 billion into the American economy could increase speculative “hot” money flows into China and fuel inflation.

The head of China’s top economic planning agency, National Development and Reform Commission chief Zhang Ping, warned this week the full year CPI would exceed the government’s three per cent target.

Other key data released by the statistics bureau showed the world’s second-largest economy showed signs of slowing last month.

Industrial output from China’s factories rose 13.1 per cent on year, down from 13.9 per cent in September, as Beijing closed high-polluting operators and rationed power to energy-intensive industries.

Fixed asset investment in urban areas, a measure of government spending on infrastructure, rose 24.4 per cent over the January-October period, slightly slower than the 24.8 per cent in the first nine months of the year.

Retail sales, a key measure of consumer spending, rose 18.6 per cent on-year.