China’s factory-gate prices maintain strength in October

Beijing: Chinese factory prices continued to surge in October, with data on Thursday showing a bigger-than-forecast jump owing to an anti-pollution clampdown that has driven up commodity prices. In a drive to clean up the country’s smog-ridden cities the government has moved to wind down production at some at steel factories and smelters, and President Xi Jinping last month emphasised environmental protection at the Communist Party congress.

The clean-air policy, which has been stepped up going into the winter when pollution worsens, has led to tighter supplies in turn lifting prices.

And the National Statistics Bureau said the producer price index (PPI), an important barometer of the industrial sector, held still at 6.9 per cent last month, beating expectations of 6.6 per cent in a Bloomberg News survey.

The consumer price index (CPI), a key gauge of retail inflation, hit 1.9 per cent, higher than the 1.6 per cent in September and also slightly beating Bloomberg’s forecast.

The figures will likely provide a boost to China’s leadership as they strive to retool the world’s number two economy so it is driven by domestic demand and away from one reliant on state investment and exports. Authorities have targeted around three per cent in the CPI this year.

“China’s reflation story remains alive, for now,” Julian Evans-Pritchard of Capital Economics said in a research note.

“The upshot is that price pressures in China appear strong on the back of still rapid economic growth, a tight labour market, capacity cuts and temporary disruptions to industrial production,” he said.

“Price pressures may remain strong for a while longer as the anti-pollution campaign keeps commodity prices elevated and this feeds through into core inflation.”

The readings come a day after a slight softening in China’s imports and exports but are the latest in a string of positive indicators suggesting the economy is stabilising, with gross domestic product tipped to grow at a faster pace than the government’s target this year.

And Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group in Hong Kong, said: “Today’s inflation data basically dismiss any hope for monetary policy easing. The authorities will continue to maintain a tightening bias.”

— AFP