The World's Factory China, Producer Price Index Hits Highest in 13 Years

May PPI Increase Rate 9%... Highest Level Since May 2008
Main Cause: Rise in International Raw Material Prices... Impact on Global Inflation Too

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China's Producer Price Index (PPI) inflation rate has reached its highest level in 13 years. Analysts attribute the sharp rise in China's PPI to the surge in international raw material prices.

China's National Bureau of Statistics announced on the 9th that the PPI inflation rate for last month was 9.0%. This is the highest level since May 2008. A rise in the PPI means that the prices of goods produced in factories have increased, directly affecting consumer prices. The May PPI forecast by major economic institutions was 8.5%.

[Image source=EPA Yonhap News]

Dong Lijuan, a statistician at the National Bureau of Statistics, explained, "In May, as international raw material prices such as crude oil, iron ore, and non-ferrous metals rose sharply, and domestic demand steadily recovered, prices of manufactured goods continued to increase."

In fact, in May, the ex-factory prices of petroleum, natural gas, and ferrous metal products including iron ore in China rose by 99.1% and 48.0%, respectively. The West Texas Intermediate (WTI) crude oil futures price also reached $70.05 per barrel on the 7th (local time), surpassing $70 for the first time in two years and six months since October 2018 based on closing price.

The World Bank (WB) stated, "Inflation is expected to continue rising globally this year as it quickly responds to the global economic recovery trend," adding, "High inflation may pose challenges to the policy choices of emerging and developing countries pursuing expansionary policies for economic recovery."

However, the Consumer Price Index (CPI) inflation rate for May was 1.3%, showing some difference from the rapid rise in the PPI. The Chinese government has set the CPI inflation target for this year at around 3%.

With the sharp rise in the PPI, Chinese authorities have also gone on alert. The National Development and Reform Commission (NDRC) held a meeting on the same day, stating that it is carefully monitoring price fluctuations of major livelihood goods and will focus on price management.

Premier Li Keqiang instructed at a State Council meeting last month, "Actively respond to speculative demand for raw materials that may affect domestic prices." He also ordered strict investigations into artificial price adjustments through hoarding, unilateral contract signing using monopoly status, and the spread of false information that stirs unrest, with public punishment upon detection.

These measures stem from concerns that a rise in China's PPI could affect the CPI and cause inflation. China's PPI increase impacts not only China but also global prices.

This content was produced with the assistance of AI translation services.