The consumer price index, a key measure of inflation, rose 0.8 percent year-on-year, the National Bureau of Statistics (NBS) said.

The reading was in line with a Bloomberg forecast and higher than the 0.7 percent increase recorded in November.

Consumer demand rose last month as the new year approached, NBS statistician Dong Lijuan said in a statement.

"Policies aimed at expanding domestic demand and promoting consumption continued to show results," Dong added.

While Beijing has been attempting to shift towards a growth model based more on domestic consumption and less on exports and manufacturing, success has been limited.

The producer price index -- which measures the cost of goods at the factory gate -- dropped 1.9 percent on-year in December, the NBS said. The Bloomberg survey had forecast a decline of two percent.

The PPI has been in deflation for more than three years, reflecting weak demand and a global oversupply of Chinese manufactured goods.