China’s Producer Prices Rise 5.7% Year on Year in October as Mining Costs Increase
Key Facts
China’s producer price index rose 5.7% year on year in October and increased 0.7% from the previous month, according to the National Bureau of Statistics of China. The annual increase coincided with a 27.9% rise in mining prices and an 11.6% increase in raw material prices, while manufacturing prices rose 3.5%. The figures show different rates of increase across stages of production, with mining recording the largest gain among the groups listed in the data. On the consumer price side, the core index, which excludes food and energy, rose 0.8% year on year in the same month. The rate of core inflation slowed by 0.2 percentage points from the previous month.
In the details of the consumer price index, gasoline prices rose 22.4% year on year in October and contributed about 0.63 percentage points to the annual increase in the index, according to the statistics bureau. This places gasoline among the items the bureau cited in explaining consumer price movements during the month. The core index, which excludes food and energy, recorded an annual increase of 0.8%, with its pace slowing compared with the previous month. These readings offer contrasting signals from factory prices and core consumer prices in October. The figures provided do not detail any link between these movements and changes in dollar-denominated bank deposit rates.
In a separate development dating back to June, Reuters reported that at least five Chinese commercial banks, ranging from state-owned lenders to smaller joint-stock banks, raised dollar deposit rates in the weeks before its report published on June 5. Two sources told the agency that two banks were offering rates close to or above the U.S. overnight secured financing rate, which stood at 3.61% at the time of the report. It was unclear then whether the increases had followed informal guidance from the People’s Bank of China, Reuters reported. In a later report dated September 4, the agency said yuan deposit rates at major state-owned banks stood at 0.95%, and that smaller banks began raising dollar deposit rates in June, prompting larger banks to follow. These events date to earlier periods and do not establish that a new decision on deposit rates was issued on November 9.
People’s Bank of China data, as reported by Reuters, showed foreign-currency deposits reached $1.18 trillion at the end of July, up 17.9% from a year earlier. In the first seven months of the year, these deposits increased by $121.2 billion. In a separate measure, the People’s Bank of China announced that it would raise the reserve requirement ratio on foreign-currency deposits from 4% to 6%, an increase of 2 percentage points, effective November 15. Reuters estimated that the measure would withdraw an additional $24 billion from the financial system. After the measure was announced on November 3, the onshore yuan fell by as much as 0.37% against the dollar, reaching 6.6728 per dollar, its weakest level since October 23.
People’s Bank of China Deputy Governor Zou Lan said China remained committed to high-level economic opening and the decisive role of the market in determining the exchange rate. China’s trade balance data were scheduled for release on November 10, with a surplus of $126.5 billion expected, according to the FX Blue calendar. That forecast relates to the upcoming release and is not the actual trade balance result. Against the background of yuan movements, an EL7 report on October 26 said the central bank had set the reference rate at 6.7162 per dollar, which the report described as the strongest since February 2023. The new reserve requirement ratio is due to take effect on November 15, after the scheduled trade data release.