China’s producer prices suddenly ascended in September for the first time in almost five years due to higher commodity prices. That’s undoubtedly welcome news for the Chinese government as it struggles to drop a rapidly surging mountain of corporate debt.
Official inflation data on Friday also demonstrated a pickup in consumer prices, assisting to ease traders’ worries regarding the health of the world’s number two economy after dismal trade numbers on Thursday rattled global financial markets.
Corporate China sits on $18 trillion in debt, which is equivalent to approximately 169%of GDP, according to fresh figures from the Bank for International Settlements. In fact, most of it is held exactly by state-owned companies.
A long uptick in inflation would be positive news for China’s capability to service its overhang of corporate debt.
With relatively low interest rates keeping debt service costs in check as well as producer prices ascending, the overall outlook for Chinese industrial profits is gradually improving.
