China's Factory Price Surge Deepens Global Inflation Worries
Comment of the Day

April 09 2021

Commentary by Eoin Treacy

China's Factory Price Surge Deepens Global Inflation Worries

This article from Bloomberg may be of interest to subscribers. Here is a section:

“Our research has found that China’s PPI has a high positive correlation with CPI in the U.S.,” said Raymond Yeung, chief economist for Greater China at Australia and New Zealand Banking Group Ltd. “The higher-than-expected PPI data could impact people’s judgment of inflation pressure in the U.S. and globally, and this impact shouldn’t be underestimated.”

And

Surging commodity prices have gained the attention of China’s top policy makers, with the Financial Stability and Development Committee -- chaired by Vice Premier Liu He -- calling this week for efforts to stabilize prices. Authorities should “keep a close eye on commodities prices,” the committee said in a statement Thursday evening.

The inflation data show consumption remains subdued, giving the central bank reason not to tighten monetary policy anytime soon, according to ANZ’s Yeung.

“If inflation pressure starts to manifest in consumer prices, policy could begin to tighten,” he said.

Eoin Treacy's view

China’s massive stimulus bailed out the world following the Global Financial Crisis. It also contributed to a significant credit expansion, a bubble in shadow banking and risked asset prices turning into the mania. They have spent much of the last decade attempting to unwind the over stimulus which has contributed to rising defaults, stricter lending criteria and more market controls.

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