What’s new: A senior official at China’s top banking regulator on Thursday urged the country’s banks to prepare to deal with how growing inflation will increase costs for businesses.
Cost-driven inflation will hurt the operations of domestic downstream industries that produce the finished goods that are sold directly to consumers, Yu Xuejun of the China Banking and Insurance Regulatory Commission said at the Caixin Summer Summit 2021. Some of these companies have been on the verge of sinking into the red.
Yu expects China’s producer price index, which gauges changes in prices of goods circulated among manufacturers and mining companies, to rise another 10% year-on-year in June, up from a 9% rate in May that was the fastest pace in almost 13 years.
The context: Concerns have increased that the world is entering a period of rapidly accelerating inflation, as global demand recovers from the pandemic more quickly than supply in the wake of unprecedented fiscal stimulus measures and loose monetary policy in major developed countries.
China, the world’s biggest manufacturer and goods exporter, is growing worried that the run-up in raw material costs will eventually hit consumers’ pockets, dent spending and hurt the profits of companies trying to recover from the pandemic.
Related: China Launches Probe Into Commodities Amid Surging Prices
Contact reporter Luo Meihan (meihanluo@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)
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