China's PPI increased by 7.5 percent year-on-year while the inflation rate rose 6.5 percent to a 37-month high in July.

Inflation was driven by a14.8 percent spike in food costs, the country's National Bureau of Statistics said on Tuesday.

The data comes amid European sovereign debt concerns and worries of a ‘double-dip' US recession, and shows that China's inflation continues to accelerate despite an 18-month monetary tightening effort.

The country's inflation rate is now showing its highest year-on-year growth since June 2008, according to published figures.

China has been trying to curb its overheated economy with tougher home-buying rules, bank reserve ratio increases and interest rate hikes.

Producer purchase prices increased by 11 percent year-on-year in July, but rose just 0.1 percent on a month-on-month basis, the NBS said.

The cost of production materials for the same period climbed 8.4 percent year-on-year, but were flat on a month-on-month basis.