The latest PPI figure indicated accelerating price pressure, coming on the heels of a 3.2 percent rise in October. The PPI had risen by less than 3 percent in each of the previous eight months.

    In August 2005, the PPI rose a record 5.3 percent.

    This year, the PPI rose 2.9 percent for the January to November period.

    Last month, crude prices rose 22.6 percent in November compared with a more moderate 4.2 percent in October.

"The major contributor was the sharp rise in crude oil prices," said Lin Songli, a Guosen Securities analyst. He added the sudden rise of crude in November could have been reflective of the accumulative rises of oil prices in recent months.

China's domestic crude prices were roughly in line with global prices, unlike government-controlled prices for refined products.

The manufacturer's prices of gasoline rose 3.9 percent to reverse a drop of 5 percent in October. Diesel oil and kerosene prices reported gains of 8.8 percent and 8 percent, respectively, up from 1.5 percent and 0.3 percent a month earlier.

The costs of raw materials, fuel and power rose by 6.3 percent from a year earlier, up from 4.5 percent in October.

Fan Jianping, an economist with the State Information Center, a government think tank, said rising production costs would add to inflation pressure in future months. This, however, could be relieved if the government beefed up macro control to cool the economy.

Lin said a surge in PPI would inevitably press for a further rise in the consumer price index (CPI).

Fan added there was no direct cause-and-effect relationship between the PPI and CPI.

The PPI mainly covers raw materials such as steel and coal, as well as machinery, electronic products, chemicals and textiles, which are used for further production.

The CPI monitors price changes in consumer products and services, about half being food products and services subject to seasonal changes.

Fan said most enterprises would choose to squeeze their profit margin to write off production costs, especially in a competitive market.

China's CPI was elevated to new highs mainly by food price increases through October, he said.

However, he agreed production costs, if continuously rising with big margins, would in the end lead to price increases of end-user products.

China's major inflation indicator hit an 11 year monthly high of 6.5 percent in August. The CPI rose 6.2 percent in September and 6.5 percent again in October, all well above the government-set target of 3 percent.

"The CPI figure for November would probably surpass that for October," Lin said.

Many analysts also believed the CPI figure for November, scheduled to be released this week, could reach another new high.

China has been taking tightening measures to curb inflation. In the latest move, the central bank said Saturday it would raise the reserve requirement ratio by 1 percentage point for commercial banks as of Dec. 25.

The government also said it would shift its monetary policy stance from "prudent", an approach it has followed for the last 10years, to "tightening" at an annual economic conference concluded last week.

It also said the country would prioritize to prevent the economy from becoming overheated and to guard against a shift from structural price rises to evident inflation.

Stephen Roach, chairman of Morgan Stanley Asia, applauded the Chinese government's move as "a pre-emptive shift aimed at achieving balanced and sustainable economic growth."