Two days ago my assistant, Peking University undergraduate Oliver Shang, told me very worriedly that the rumors were that PPI was going to come in higher than expected. Yesterday at a news briefing the NDRC said September PPI was up 4.0% year on year, following a 2.6% number in August.
According to Dong Tao at Credit Suisse (and as far as I know he has had the best and most consistent call on Chinese inflation), that brings PPI inflation for the first nine months of 2007 to 3.6%, versus 2.5% for the same period last year.Steel and cement drove much of the rise – so we can’t blame pigs for this one.
Gasoline prices are vulnerable too. The last time the government hiked prices (and still kept them below a real market-clearing rate) was when oil was at $60 a barrel.Might gasoline go up soon, or will we continue to bury that component of inflation in higher taxes?
My colleague trevor points to record high iron ore prices in the ppi import bill, with steel an ever greater share of economic activity, sadly (iron and steel alone use almost twice as much energy as all the households in China. yes, all the households in China.). Gas will not inflate much though -- as you say, will be buried in taxes to make transfers to Sinopec to make them whole for selling gas under cost.
By DHR - 10/23/2007 11:17 PM
According to a news from Bloomberg, Mundell has critizised the option of a big revaluation. here is the argument he made in an interview. http://www.feer.com/articles1/2007/0706/free/p016.html He is optimistic about the inflation effect. How do you consider it?
By litz - 10/24/2007 7:58 AM
Enjoying your comments.
The September 12th report by Fitchratings.com showing the effects of all the SIV's coming on to the balance sheets of international banks in the US and Europe and their BIS capital ratios falling below 8% suggests a revaluation has to happen before the year end financials come out in December 31st, 2007 to finance the conduit proposal.
Michael Pettis is a professor at Peking University's Guanghua School of Management, where he specializes in Chinese financial markets. He has also taught, from 2002 to 2004, at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the board of directors of ABC-CA Fund Management Co., a Sino-French joint venture based in Shanghai.
Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the Sovereign Debt trading team at Manufacturers Hanover (now JP Morgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was Managing Director-Principal heading the Latin American Capital Markets and the Liability Management groups. He has also worked as a partner in a merchant banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team. Besides trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
Pettis is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. He is the author of several books, including The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (Oxford University Press, 2001). He received an MBA in Finance in 1984 and an MIA in Development Economics in 1981, both from Columbia University.
Subscribe to this Site
Comments (4) for "PPI is up too"
- 10/24/2007 11:35 AM
December, 2007