Exchange rate volatility drives China inflation

BEIJING: China’s producer price index measuring wholesale inflation reached a five-year-high last month as the country’s consumer inflation also grew faster year on year, official figures showed yesterday.

The producer price reading was up 5.5 percent year on year, the highest reading since September 2011, the National Bureau of Statistics (NBS) said.

China’s consumer price index, another main gauge of inflation, rose 2 percent last year, up from 1.4 percent in 2015, according to an NBS statement.

Factors including exchange rate volatility and rising prices of coal and steel amid steadily growing market demand may have contributed to the recovery, the official Xinhua news agency reported.

Rising consumer prices put upward pressure on wages, but falling producer prices pushed companies’ income down, experts said.

China is expected to announce the nation’s gross domestic product growth for 2016 later this month.

Most analysts predict China will be able to meet its lowered growth target for 2016 of 6.5 to 7 percent.

China’s economy was estimated to have grown about 6.7 percent last year, Xu Shaoshi, director of the National Development and Reform Commission, told a press conference yesterday.

Xu pledged to continue cutting steel and coal production to address excess capacity which has put pressure on world markets.

Authorities last year cut production capacity worth 45million tons of steel and 250 million tons of coal and resettled 700 000 workers in new jobs, Xu said.

“This year’s task will be more arduous but we will adhere to the main line,” he said.