China’s consumer price index (CPI) rose 0.9% in February from last year, remaining unchanged from January. China’s production price index (PPI) rose 8.8% in February, down from a 9.1% increase in January, traveling at its slowest pace in eight months. Despite this, the impact of raw material costs linked to the conflict in Ukraine is smoldering and will soon manifest its effects on the performance of the Chinese economy.
The growth goal
Premier Li Keqiang has just set in the Work Report 2022 that draws the roadmap of the Chinese economy a target for the growth of inflation equal to “about 3%”. Maintaining low inflation is crucial for China, not only to allow room for maneuver for centrally planned fiscal and monetary policies, but also to build a wall against the hyperinflation that instead characterizes the bloc of Western countries, the United States in the lead. and to maintain the purchasing power of the yuan.
While factory price inflation in February increased at the slowest pace in eight months, the rise in commodity prices in response to the war in Ukraine has begun to seep. Food prices fell 3.9%, down from the 3.8 drop in January. But non-food product prices rose 2.1% year-over-year, up slightly from a 2% growth in January.
Raw materials effect
An inflationary contagion that would be lethal for China, a country whose economy still rests on import-export, especially with the countries of North America and Europe.
The Official Producer Price Index (PPI) reflects the prices that factories charge to wholesalers for their products. If they fell year-on-year in February, prices rose by 0.5 percent in monthly terms, the highest since last October. The main factors were the higher prices of oil, gas and iron ore.