China’s Producer Prices Fall to Record Levels as The Economy Slows

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China’s Producer Prices Fall to Record Levels as The Economy Slows
China’s Producer Prices Fall to Record Levels as The Economy Slows

China’s Producer Prices Fall to Record Levels as The Economy Slows

In an unprecedented development, China is facing a huge challenge as its producer prices which is a measure of the cost of goods as they leave the factory has gone beyond the level of comfort. Now it has extended the longest slide since the 1990s. According to some market observers it is adding to evidence that the world’s second-largest economy is on a slump.

The latest reports coming from the government of China show that the producer-price index or SHCOMP fell 1.4 percent from a year before and consumer-price gains trailed estimates at 2.5 percent. Another worrying development is that China’s imports have increased to a great extent and it rose the most in five months in December.

Market analysts observe that the increase in imports indicates that domestic demand will support economic growth. Even the government of China has claimed the title of the world’s biggest trader of goods; however, inbound shipments which advanced 8.3 percent from a year earlier may give concerns to exporters.

Notwithstanding what, the trade surplus was $25.6 billion and this is still a positive development for China. Whereas on the one hand, improving demand will help support expansion amid risks from rising domestic debt, on the other hand, the country is looking for inward trade and decrease dependency upon exports.

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Additionally, as President Xi Jinping’s broadest policy reforms since the 1990s are coming up and when the country has already injected 50 billion dollars in the market to boost the national economy, it looks China is all set to become the top trading nation. In fact, the country recently announced that it passed the U.S. to become the top trading nation in 2013.

Chinese government is also concerned about challenges for exporters; a major concern is gains in the yuan and increased labor costs. A major booster, however, for China is that domestic demand is not as soft as had been feared. Though the Chinese exports are slow, they are still sending the right signals as it is still a trade surplus country.

The latest reports coming from the government of China show that the full-year trade surplus was $259.75 billion which is the widest since 2008 and the third-biggest on record. On the other hand, U.S. trade totaled $3.53 trillion through November 2013. However, it is China which took the thunder and became No. 1 in goods exporter in 2012.

To contact the reporter of this story: Jonathan Millet at john@forexminute.com