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Chinese Producer Prices at 13-Year High

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Chinese producer prices rose to their highest level in 13 years in August. In particular, the continued rise in raw material prices such as coal, steel and chemicals is causing costs for producers and manufacturers to rise sharply, despite Beijing’s frantic efforts to contain these price increases.

 

Producer prices rose 9.5 percent year on year, China’s statistics agency reported. A month earlier, it was a plus of 9 percent. Consumer inflation rose by 0.8 percent year-on-year in August, from 1 percent a month earlier.

The lower rise in consumer prices is mainly due to the lower costs of food. Consumer inflation also slowed as spending on airline tickets, tourism and hotel accommodations fell after Beijing imposed strict rules to curb virus outbreaks.

According to the policymakers of the Chinese central bank, the recovery in producer prices is temporary. As a result, the Chinese government is trying to temper the price increases by raising export tariffs on certain iron and steel products. In addition, Beijing temporarily exempts tariffs on iron and scrap and has removed tax credits for exports of some steel products to increase supply in the domestic market.

The world’s second-largest economy has largely recovered from strict measures to contain the spread of the coronavirus. But an increase in the number of infections with the Delta variant has raised concerns about the recovery. In addition, there are fears that inflation could rise further as lockdowns cause supply problems in parts of the country.

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