China's headline consumer price index rose 1.8 percent on the year in December, up from 1.6 percent in November and just below the consensus forecast of 1.9 percent. The index was flat on the month after falling 0.2 percent previously.

Stronger headline inflation in November was mainly driven by a stronger increase in food prices. These rose 4.8 percent on the year after advancing 3.7 percent previously. The year-over-year increase in non-food prices was unchanged at 1.1 percent, while core CPI, excluding food and energy prices, rose 0.7 percent on the year, up slightly from the 0.6 percent increase recorded previously.

Consumer Price Index (CPI) is an index that measures changes over time in the price level of consumer goods and services purchased by residents, which reflects the overall changes in price level.

Consumer prices account for a majority of overall inflation, which is carefully monitored by investors worldwide. Investors worldwide monitor Chinese price changes closely. A pickup in inflation could mean an increase in interest rates is in the offing from the People's Bank of China while an easing could mean looser monetary policy. The monthly CPI is broken down by 8 categories with more detail available on the following day including aggregate information by urban and rural areas and provinces.

The CPI measures the change in the level of prices for a specified basket of goods and services normally purchased by urban and rural residents. Approximately 226 areas throughout the country are covered, including 80 counties and 146 cities. The current CPI is an annually chained Laspeyres price index and has been available since 2001. From 1978 to 2000, the index was compiled using current year weights for most items.