China Tells

China’s CPI dropped 0.5% in October, which is the slightest drop since the beginning of the year. I think such a reading confirms the market expectation of China’s inflation coming back to positive territory in the near future (See Article from Chinatells), even though it is still negative now. The key to watch would be USD exchange rate and oil price, which is negatively correlated by nature. Last time when Oil price went to $150, China suffered high rate of Inflation higher than 8%. Whether history will repeat remains to be seen. In the meanwhile, China’s PPI in Oct dropped 5.8% in October year to year, continuing a down trend but slightly better than that of Sept.

中国消费者物价指数10月份下降0.5%。虽然消费者物价指数还在下降，但看来通缩的风险已经消除，通胀的风险日渐严重。中国政府宽松的货币政策被指责很可能造成严重的通货膨胀。中央政府在最近下决心收紧无序贷款，不过放出去的贷款犹如泼出去的水，要对其控制谈何容易。如果国际油价在美元下跌的背景下持续攀高，那下季度通胀的风险应该还会更高。