Ukraine war raises China’s ‘imported inflation’ concern as oil, nickel prices surge
- China’s producer price index (PPI) growth rose at the slowest pace in eight months in February, but rising commodity prices have started to filter through
- Benchmark Brent crude oil hit US$139.13 per barrel on Monday amid the ongoing Ukraine crisis, increasing the risk of ‘imported inflation’ for China
Wild swings in the prices of energy, metals and other raw materials triggered by Russia’s invasion of Ukraine may start to weigh on China’s economy as inflation concerns outweigh worries over production costs and supply chain disruptions, according to analysts.
Global benchmark Brent crude oil prices have fallen from reaching over US$139 per barrel on Monday, but still increase the risk of “imported inflation” for China, according to Lu Zhengwei, chief economist at Industrial Bank.
“China is the world’s major importer of commodities, and rising commodity prices may push up the year-on-year reading of its imports,” said Lu, who estimates that China’s crude oil imports account for around 10 per cent of its total imports by value.
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But while the growth of the headline figure slowed, China’s PPI grew by 0.5 per cent from the previous month, the data released on Wednesday showed, marking the quickest month-on-month growth since a rise of 2.5 per cent in October.
China International Capital Corporation said that the escalating conflict between Ukraine and Russia, coupled with the long list of sanctions imposed by the US and European Union, will significantly drive up commodity prices and disrupt supply chains.