China could hike interest rates four times in the second and third quarters to address serious short-term inflation threats, reflected in a 7.1 pct rise in January consumer price index (CPI), Standard Chartered said.

In a note, Standard Chartered economist Stephen Green said the January inflation figure -- announced today by the National Bureau of Statistics -- was high, although it came in lower than his forecast of 7.5 pct.

'The economy faces a serious short-term inflationary threat, but we find ourselves in the minority on rates ... We think the central bank will have to move on rates before too long, despite US rates, and the slowing growth influence of the US, which will kick in later in the year,' Green said.

Food prices continue to drive China's CPI growth, but non-food prices are also trending up on higher fuel costs and stronger pressures from manufacturing, Green noted. Food prices were up 18.2 pct year-on-year in January, while non-food prices were up 1.5 pct.

Green noted that pork and beef prices continue to move higher, while the severe weather across much of China in recent weeks has hit crops hard, particularly rapeseed and vegetables.

Officially, 11.9 mln hectares of crops were hurt by the low temperatures, with 5.88 mln hectares severely impacted and 1.77 mln hectares completely destroyed, Green said.

The CPI figure follows yesterday's release of the producer price index, which was up 6.1 pct in January.

Green said China's central bank will also raise the reserve requirement ratio in light of the continued inflation threat.

'We look for four more (interest) rate hikes during the second and third quarter and of course more reserve requirement hikes; the next is imminent,' he said.

Green said that bank loan quotas will stifle money supply growth, but he warned of an influx of funds into the informal financial system if real deposit rates remain below zero. This would undermine loan controls, he said.