Recently, China’s commodity prices have continued to move upward, with the price index hitting a ten-year high. According to an article recently published by a CCP central bank official, the medium and long-term trend of commodity prices may have taken shape in the medium and long-term upward trend.
Recently, the Chinese Communist Party Premier Li Keqiang hosted an executive meeting, twice in a row to focus on the issue of rising commodity prices. The meeting said, “to attach great importance to the adverse impact of rising commodity prices.”
Data from the China Iron and Steel Industry Association shows that domestic steel prices have continued to rise this year, and by the end of March, China’s steel price index had risen 9.4% from the beginning of the year, up 37.37% year-on-year.
In early April, the commodity price index hit a ten-year high, with large increases in energy, minerals, non-ferrous metals and steel.
According to the 21st report of China Business News, in the past year, the price of commodities increased by more than 100%, and the price of copper once soared by 130%.
According to Wang Yu, manager of Guotai Chemical Leading ETF, it may take about two to three years for the status quo to change, because if the global economy continues to recover, demand is rising. However, the round of inflation tolerance will be a bit higher if the continuous supply supply is not available.
On May 21, Lv Jinzhong, director of the investigation and research department at the People’s Bank of China headquarters in Shanghai, published an article in China Finance, arguing that, in terms of impact, the upward movement of commodity prices in China has significantly pushed up production costs for enterprises, triggering adaptive adjustments in pricing, order taking and inventory management behaviors; and rising credit risk and compliance risk for banks.
For real enterprises, raw material costs account for a high proportion, pushing up corporate spending significantly upward. The impact of this raw material price increase on enterprises is mainly in production costs, product prices and capital turnover.
Commercial banks, commodity price fluctuations impact on business production and operation, increasing the credit risk of commercial banks. Production costs rose sharply will cause the deterioration of business conditions, if prices continue to shake sharply, may lead to a concentration of credit risk in part of the industry chain, impacting the quality of commercial banks credit assets.
According to the article, the medium and long-term trend, commodity prices in the medium and long-term upward trend may have taken shape. First, unlike in the past, after the current round of the epidemic, the speed of money circulation caused by the economic recovery and quantitative easing continues to pick up, the risk of narrow inflation brought by the monetization of debt in major economies and emerging markets will likely rise.
As of press time, the above article about Lv Jinzhong has been deleted.
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