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China market round-up: CPI rises, November credit data surprises, China sets up oil and gas giant

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By Rebecca Feng
13 Dec 2019

In this round-up, surging pork price drove China’s consumer price index (CPI) up again, new loans growth beats market expectation and the Mainland has revealed plans to shake up the country’s natural gas market.

China’s consumer prices rose further in November, according to data published by the National Bureau of Statistics on Tuesday.

November’s CPI rose by 4.5% year-on-year, up from a 3.8% increase in October. The growth is the highest reading since January 2012, analysts pointed out. The rise was largely driven by surging pork prices, which saw a sharp year-on-year jump of 110.2% in November. The producer price index declined by 1.4% year-on-year.

Non-food price inflation edged up to 1% year-on-year in November from 0.9% in October. Food prices were up 19.1% year-on-year, an increase from 15.5% in October.

Barclays expects the CPI inflation to rise towards 5.2%-5.4% in January and February before easing slightly to 5% in March, according to a Tuesday note.

“Beijing faces a dilemma of a worsening growth slowdown and a rapid rise of CPI inflation,” Ting Lu, chief China economist at Nomura, wrote in a Tuesday note. “In response to worsening growth prospects, we believe Beijing will roll out further policy easing measures. However, amid concerns over rising CPI inflation expectations, we believe the People’s Bank of China will likely prefer low-profile easing measures to inject liquidity in the near term.”

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The People’s Bank of China released credit data for November on Tuesday evening. Analysts said that the data was a positive surprise.

New renminbi loans reached Rmb1.39tr ($199bn) in November while renminbi loans to the real economy reached Rmb1.36tr. Total social financing grew by 10.7% year-on-year and reached Rmb1.75tr in November.

The shadow banking sector continued to shrink. Trust lending contracted by 3.7% year-on-year while bankers’ acceptances contracted by 12.6% year-on-year.

“The rebound in November credit growth potentially reflects the loosening intention of the government,” Yu Song, chief China economist at Beijing Gao Hua Securities, wrote in a Tuesday note. He added that the policy change could be driven by concerns of further downward pressures from exports, the weak October credit data and the start of a downward trend of pork prices.

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China has set up a national oil and gas company, state media Xinhua news reported on Monday. The new company will separate the transportation, production and sales of oil and gas and facilitate market competition, the report said.

Xinhua added that the State-owned Assets Supervision and Administration Commission will have a 40% share in the new entity, with the three energy giants – China National Petroleum Corp, Sinopec and China National Offshore Oil Corp – holding the remaining.

By Rebecca Feng
13 Dec 2019