bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Frank Tang

Prices for producers in China’s factories surged last month, increasing the chance that the authorities may have to raise interest rates to curb inflation.
It is the first time factory gate inflation has outstripped general consumer inflation in five years.
The increased costs were largely due to rallies in the price of coal, oil and steel amid increased demand in China’s slowing economy.
The official producer price index jumped 3.3 per cent in November, according to data released by the National Bureau of Statistics on Friday.
That compares with rises of 1.2 per cent in October and 0.1 per cent in September.
The consumer price index edged up 2.3 per cent in November.
China’s exports rally on weak yuan, ‘Trump tariff threats’
A higher reading in the producer price index than the index for consumer inflation creates a dilemma for China’s central bank.
Maintaining low interest rates will discourage investors from keeping holdings in yuan, with the nation’s currency falling in value against the dollar and the government attempting to stop the flow of cash overseas.
Raising interest rates to curb spending and inflation, however, could crush state firms already struggling to pay off huge debts.
Inflationary pressure in China comes amid signs of stronger price rises in other major economies including the United States, the European Union and Japan.
The US Federal Reserve has been widely tipped to raise interest rates this month and China’s central bank may also ponder a similar move.
Sheng Songcheng, the former head of the central bank’s statistics department, said at a financial forum in Beijing last week that China could consider a rate hike.
His comments marked the first time people close to Beijing’s monetary policymaking circle have intimated a rate hike was likely in recent months.
China’s foreign reserves fall again in November even as Beijing tightens screws on capital outflows
Deng Haiqing, the chief economist at JZ Securities, agreed with Sheng’s assessment in research note issued after the inflation data was published.
“The central bank should properly think about an interest rate rise,” Deng wrote.
Julian Evans-Pritchard, a China economist at the research house Capital Economics, wrote in a research note that China was now a source of global inflationary pressure rather than of deflation as many had previously feared.
China’s producer price index rise comes after the figures ended a 54-month decline in September.
Coal prices surged 28.6 per cent last month and the cost of ferrous metals jumped 22.6 per cent.
“The PPI is likely to continue the rise in year-on-year terms and may peak at about four per cent in the first quarter next year,” said Yan Ling, an analyst at China Merchants Securities in Shenzhen.
China’s bid to cut production overcapacity in heavy industries ‘losing steam’, survey suggests
The surge in producer prices may also have been fuelled by factors such as Beijing’s efforts to shut down coal and steel producing plants.
Tim Condon, chief Asia economist at ING in Singapore, said in a research note that producer price inflation may lose steam if the government’s crackdown on excess production capacity doesn’t spread beyond steel and coal, the two sectors targeted by Premier Li Keqiang.


China’s 2025 growth forecast raised to 5% by IMF, citing resilience

China’s consumer prices rise at fastest pace in nearly 2 years in November

European firms need to abandon overreliance on China and US, chamber report warns

China’s Guangdong targets doubling GDP by 2035 despite slowing growth

China economy

China factory prices rise, fanning fears interest rates will increase

Increases in steel, oil and coal prices added to costs in China’s factories. Photo: Xinhua

epa05666806 A picture made available on 09 December 2016 shows a customer (R) paying a vendor (L) for vegetables at a public market in Beijing, China, 08 December 2016. China's consumer price index, which is a factor in determining inflation rates, grew 2.3 percent year on year in November, which is up from 2.1 percent in October, according to figures released by the National Bureau of Statistics on 09 December. EPA/ROLEX DELA PENA

News

China

Economy

China Economy