China’s producer prices rise sharply on oil cost
By James Kynge in Beijing
Published: November 11 2004 12:42
Surging oil costs helped drive Chinese producer prices to their most rapid rise in at least seven years during the month of October, reinforcing a sense among Chinese policy advisors and senior bankers that interest rates are set to rise further in coming months.
The producer price index (PPI), which measures prices of goods at the factory gate, rose 8.4 per cent in October compared to the same month a year ago, the biggest monthly leap since the Asian crisis hit the region in 1997/98.
Although the October leap was in part due to higher oil prices, other more entrenched factors - such as rising steel, coal, electricity and other metal prices - also contributed to rising prices, officials at the National Bureau of Statistics said.
Ma Weihua, president of China Merchants Bank, a leading commercial bank, told the Financial Times that the problem of excessive investment in fixed assets had not yet been resolved and this was leading to inflation and distortions in the economy.
“There is room for interest rates to rise and I think there could be another rate rise,” Mr Ma said. He explained that the negative real deposit rates in the banking sector were leading to speculative buying of property, which was a concern.
China raised its interest rates for the first time in nine years last month by 0.27 per cent for one-year loans and deposits, triggering sell-offs in world metal exchanges and depressing the stock prices in Europe and the US.
However, some economists in China argued that Beijing may wait some time before making another decision on interest rates because some indicators were starting to show areas of the economy slowing appreciably.
Growth in China’s broad money supply eased to 13.5 per cent in the year through October, the slowest pace in nearly three years, well below the target of 17 per cent set by the People’s Bank of China, the central bank.
Official statistics showed that the PPI was driven higher in large part by the price of crude oil, which rose 41.4 per cent in October compared to the same month a year ago, while petrol was up 21.6 per cent, and coal was up 22.2 per cent. Prices of steel products were up between 14.5 per cent and 22.6 per cent.
In a separate development, Lou Jiwei, deputy finance minister, was quoted by the official Chinese media as saying it was not very likely that there would be any big move in the exchange rate of the renminbi, China’s currency, in the near future.
He was responding to speculation that China may be about to widen the band within which its currency fluctuates.
|
