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Inflation and liquidity squeeze, Chinese growth in danger

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Stabilize the market by draining liquidity. Hold back commodity speculation. The interventions of the Chinese authorities run aground against the increase in inflation in May 1.3% year on year, below the 1.5% expected but with a tendential increase to the highest levels for thirteen years now. Adding concern in China is the prudent position of the central bank which injected only 10 billion dollars into the market, too little to stabilize the market and loosen the liquidity squeeze.

Raw materials, a heavy cost

As was to be expected, despite the efforts of the Authorities, also in May China accuses a trend increase in producer prices to the highest level ever reached in almost thirteen years, due to a surge in the cost of raw materials, according to official data. published today. An indicator that adds to the recent slowdown on the orders front.


In particular, the index increased by 9% year-on-year according to the National Statistical Office. In the previous month of April, the trend increase was 6.8 per cent. In May, inflation in China increased by 1.3% year-on-year, a result slightly below market expectations which indicated an increase of 1.5%.

Compared to the previous April, consumer prices fell by 0.2 percent. On a trend level, the prices of food products increased by 0.3% while the prices of non-food goods by 1.6%.

There is little credit, nervous companies

Earlier this week, the central bank had drained $ 157 billion from the market to support cash-strapped companies. A provision to support the banking system at a later time, even if the Central Institute does not want to create panic, but rather to maintain a prudent attitude towards the market.

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