Should investors worry about inflation in China? – Fidelity

By FXStreet Ayesha Akbar, portfolio manager at Fidelity Solutions, discusses the latest Chinese inflation figure.

Key Quotes

“Today saw the release of China’s monthly inflation statistics, with the official consumer price index rising 2.3% year-on-year in April. Some might be surprised to see positive inflation coming out of China – after all, one of the dominant narratives around China has been whether it is exporting deflation having built up excess capacity in its industrial sector. On the domestic front, however, Chinese inflation has been reasonably robust, driven higher pork prices but moderated by falls in transport and communications prices.

Rising, falling or keeping steady?

“Property prices are picking up because of extra stimulus, with this feeding into inflation through higher rental costs. But this is unlikely to be an ongoing trend and the Chinese authorities will watch closely to ensure that this doesn’t hurt living standards too heavily.

“More important for the outlook on Chinese inflation is food prices, with these being a bigger component of EM inflation indices generally. Pork prices were up strongly compared to the previous year (33.5%), though less rapid growth in vegetable prices helped to keep a lid on inflation. In the medium-term, these are unlikely to continue rising at …read more

Source:: FX Street