It is difficult to bear the weight of raw materials, labor and other continuous rising Chinese real economy suffering

A manufacturing security door enterprises located in Zhejiang recently to its dealers around the verbal notice, intends to raise the price of security doors from the 15th of this month, by hundreds of yuan, mainly due to the price of steel and related raw materials, so that manufacturers are overwhelmed, only through price increases to digest.

And the enterprise has been in March this year to raise the factory price, only because the price of steel rose by more than double.

No coincidence, recently the Internet also circulated an electrical company in southern China to suspend taking orders to tell the letter, said that due to the global capital of China’s manufacturing industry crazy suppression, speculation on a variety of manufacturing raw materials, hoarding chips, etc., resulting in metal raw materials, glass, foam, switches, etc. continue to significantly increase prices continue to go up, so that the cost of components and the whole machine materials rise too much, labor costs are also getting higher, the company 4 -In May, the company’s production port is all labeled manufacturing. We have decided to suspend accepting orders from ODM customers since May 15, and suggest customers to wait and see for two weeks, and then negotiate the price when the material is slightly stabilized.

Steel, iron ore and other international commodity prices continue to rise, becoming an important driver to push up China’s PPI growth in April jumped to a three-and-a-half-year high. And this may just be the first roadblock for China’s real economy on the way to economic recovery after the epidemic.

China’s consumer price index (CPI) rose 0.9% year-on-year in April, slightly below the Reuters poll median estimate of 1%; of which, food prices fell 0.7% and non-food prices rose 1.3%. the industrial producer ex-factory price index (PPI) rose 6.8% year-on-year in April, the highest since October 2017 and above the Reuters poll median estimate of 6.5%.

Following the release of the data, the latest research report from CICC, a large domestic investment bank, cautioned that raw material price increases squeezed downstream profits and focused on the later PPI chain trend. It is expected that the year-on-year high point of PPI may be in the second quarter due to the base, but the later ring trend will determine the speed of PPI slowdown year-on-year. Close attention needs to be paid to the impact of domestic supply-side production restrictions on the prices of bulk products such as steel, aluminum and coal, as well as the impact of the U.S. and European demand recovery faster than the global supply recovery and the delayed withdrawal of U.S. easing on the prices of international raw materials such as copper, oil and chips.

According to the report, the downstream to raw material price increases transmission is limited, profits under pressure. PPI year-on-year upward, the upstream (black, non-ferrous, energy and chemical) gross profit benefit, while the downstream manufacturing (textile, furniture manufacturing, computer), midstream capital goods (other manufacturing, instrumentation, metal products), utilities (electricity and heat production and supply) gross profit damage. Wires and cables, batteries, electrical machinery, motors, household appliances, transportation, auto parts of the total input of raw materials accounted for 20-50%, subject to greater impact.

In response to the recent rise in global commodity prices and the imported inflationary pressures they bring to China, the op-ed in the 2021 First Quarter Monetary Policy Implementation Report released by China’s central bank on Tuesday said that the imported impact of higher foreign inflation on China is mainly reflected in the prices of industrial goods, which, combined with the impact of last year’s low base, may push up China’s PPI in the second and third quarters of this year.

The op-ed also said that, according to the comprehensive study, the global commodity price increase may push up China’s PPI in a phased manner.

Wednesday’s regular meeting of the Chinese State Council also pointed out that to track and analyze the situation at home and abroad and market changes, effective response to the rapid rise in commodity prices and its collateral effects.

**Who understands the suffering of the real economy? **

Despite China’s first quarter GDP growth of 18.3% year-on-year, the two-year average growth of 5.0%. Sheng Laiyun, deputy director of the National Bureau of Statistics, also mentioned during the recent interpretation that the cost of raw material prices are rising, the problem of financing is difficult and expensive has not fundamentally changed, and the real economy is still in recovery. From these circumstances, the foundation of the current economic recovery is not yet solid.

Obviously, the continued rise in raw materials and labor costs for the manufacturing country is obviously not a good news.

Last year, he started his own business and engaged in foreign trade, young people in Shenzhen Xiao He obviously feel the pain of the real economy. The speed of the price of raw materials is too fast, the contract was thought to be profitable now all because of the rising costs of manufacturers to raise the pricing, while the price of goods signed with foreign investors can not be adjusted upward, coupled with a significant appreciation of the exchange rate of the yuan, “now can only lose money to earn a shout, carry it, really can not carry only close.” Xiao He said helplessly.

And two years ago in response to the government’s call for college students to start their own business, engaged in audio books, Xiao Wang, also in the labor costs continue to rise as well as the audio book market squeezed by both sides of its suffering, “do not do it unwillingly, continue to do it and too difficult, entrepreneurship is really too difficult.”

In the general environment of domestic demand is still weak, this may be just the tip of the iceberg of many entities in China’s small and micro economy in the face of rising costs of raw materials, labor, etc., and limited market space, may face life and death.

China’s central bank has just released April financial data across the board lower than expected, also shows that the entity financing demand is weak and worthy of attention.

Rising raw material prices have caused at least three major Chinese power coal price index makers to suspend the release of relevant price indices, as coal prices have jumped 20% in a month during the traditionally slow demand season. At least three major Chinese power coal price index makers suspended the release of related price indices as coal prices, traditionally low in demand, jumped 20% in a month.