Published: Thu, January 12, 2017
Research | By Elizabeth Houston

China CPI Rises 2.1% In December


China is the world's biggest trader in goods and its performance affects its trading partners from Australia to Zambia, many of which have been mired in tepid inflation for years, which has in turn caused a drag on the global economy. A construction and lending boom has boosted the prices of raw materials.

The Producer Price Index (PPI) surged 5.5 percent from a year ago in December, the fastest pace since September 2011, according to Chinese government data.

The Producer Price Index (PPI) in 2016, which measures inflation based on wholesale prices, declined by 1.4 per cent compared to 2015, which moderated 5.2 per cent drop year-on-year, Xinhua news agency reported.

The yuan weakened 6.5 percent against the dollar past year, its worst performance since 1994.

Accelerating prices in the Chinese economy are also contributing to stronger global inflation expectations in 2017.

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Consumer inflation rose 2.1 percent on-year, missing expectations, as food prices rose at a more modest 2.4 percent pace.

Factors including exchange rate volatility and rising prices of coal and steel as market demand grew steadily have led to continuous rises in PPI, analysts said.

The PBOC reaffirmed it would keep liquidity in the financial system stable while taking steps to prevent asset bubbles and financial risks in its annual work meeting for 2017. On a monthly basis, CPI inflation rose 0.2 percent, up from 0.1 percent in the month earlier.

The increase picked up from 3.3 percent in November and 1.2 percent in October.

The pick-up in inflation will mainly be driven by movements in commodity prices and is unlikely to be sustained, the economist added.

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