Analysis: China Tries to Lift Factory Prices, but Demand Is Still Missing
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China appears to be engineering a floor under producer prices through administrative pressure, as a narrower September decline hints at early effects, but without stronger demand, any gains may remain fragile.
The producer price index fell 2.3% year-on-year last month, its mildest drop in seven months. The improvement chiefly came from heavy industry.
In July, Beijing called for curbing “low-price, disorderly” competition and promoting the exit of outdated capacity. Markets have interpreted this as a signal of tighter discipline in sectors prone to price undercutting.
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- China’s producer price index fell 2.3% year-on-year in September, the smallest drop in seven months, mainly due to administrative efforts targeting heavy industry.
- Commodity prices for inputs like polysilicon, coking coal, and lithium carbonate rose sharply since July, but broader demand and consumer prices remain weak.
- Gains are mostly upstream; lack of strong demand and sluggish consumer spending mean any producer price recovery may be temporary.
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