Enda Curran on China Data (Audio)

does suggest inflation in China is accelerating. Juliet in particular, what's driving up the headline number has been a big uptick in the price of food. Pork prices actually gained on year, and fresh fruit and veg also up in

the double digit area as well. So food is a big part of what's happening, and it might suggest that China's inflation is accelerating, except I would point out to you that on a core basis, China's inflation actually only gained zero point eight percent, So on a core basis, which is really what a lot of central banks ultimately look at strips out of price of oil and food and everything else, it's fairly modest. So I'm not sure that this will change the game that much. In China.

We know premiarily catching himself a saide by the way, that as long as you keep inflation, say below three and a half percent, an unemployment below five and a half percent, they can kind of nurse things along. Okay. So so you know, on a headline basis, yes, China's inflation is accelerating. You could say that's pointing towards the global trend, but I don't see it as a game changer. You look at the trade data that we had earlier in the weekend, particularly the export numbers very robust. I

can't recall I think it was eighteen percent. Was that the game? And so when you look at what's happening with producer prices, an increase of four point two percent. And I think it's also fair to point out that there has been a substantial pullback in the price of crude oil, probably since the survey data for the month of July was put together. So the producer price story in Shina is a dramatic turnaround from where a war

a year ago. So today's numbers did show, like you mentioned, a producer prices are cooling, and that's for two reasons. And one base effect, it's being compared to a big surge one year ago. A number two, like you mentioned, commodity prices me off the boil and the oil prices coming off the ball. Remember that oil actually is back to where it was before the Russian invasion of Ukraine. So all of that is lending itself towards taking pressure

off China's factory cost space. That would be good for their profits, and you know, at the margins, it might sort of take pressure off the global inflation story because the Chinese factors won't be under as much pressure to

lift their own prices to the global consumers. But when you take the PPI slowdown in its totality in China, th it just kind of adds to the picture of saying a few moments ago that, okay, you can say headline inflation is picking up, but the overall inflation story in China remains certainly relatively subdued and even somewhat subdued really, and I think that the authorities won't be too concerned about it, and they will continue to tap some money

into the economy to keep things taking over all, right, continue to stimulate then, and looking ahead as well into what kind of I guess impact we've seen from the COVID lockdowns and and how much further that could complicate things too. There's no doubt that the ongo in COVID lockdowns are complicated the recovery, especially on the services and the consumer side. That's one of the reasons inflation is somewhat subdued. Juliet, You know there there has been clearly

the export story has recovered. Maybe that's a mixture of factories getting back online. Now for the lockdowns, maybe it does reflect ongoing robust global demand, but there are some sounds of weakness in the numbers. But nonetheless, the really soft part of the economy remains the real estate sector, the consumer spending sector, in the services sector, and COVID zero is kind of having casting a long shadow over

all of that. And obviously, with the variant of omercron that we all know about, that's going to continue testing China strategy. And you could argue China's over the worst this lockdowns. Shanghai came out of that brutal two months lockdown at the end of May, and perhaps China is pulling clear of that, but nobody can say that for certain. Still a long time before the Party Congress comes up

in November. So if there's not a resolution to the fact that the property market is still suffering right now, sales continue to shrink. If there's not a resolution, does that mean that there is the probability that we're going to see even more of a drag when it comes to inflationary pressures on the retail level. Because the property market is in such dire straits, I don't think anybody is yet calling a bottom or turnaround for the real

estate sector. And as you say, when you consider the outside effect that has on people's sense of self worth, on household net worth in terms of overall economic activity, the estimates are up to maybe around twenty percent economic activity.

So if you have the housing sector in the slump that it is, with salesman continue to be weak, and anyway, the ongoing practical disruptions linked with COVID zero in terms of what that means for finishing developments and people getting in about of course, that's going to continue to be

a drag on the broader economy. And nonetheless, though the consensus is that Sean's second half will still be better than the first half, that things will be improving that the infrastructure spending is getting accelerated at the local government level.

That will start up some activity that the authorities will put a floor under the under the realist its sectory already they are taking measures, remember talk for special fund to help those developers get those projects finished, and of course mortgage forgiveness for those people who don't want to pay the mortgages until the developments are done. So there's a suggestion that maybe they might put a floor under it. But again, a lot of ifs and boats in all

of this. You would have to say, this still remains a lot of pressure on China's economy and if the export story does come off the ball the way people have been calling for a long time now, then it could be a bumpy end of the year for them. Speaking of getting out and about I know you've been closely monitoring, both for your job and personally what's happening

in Hong Kong with the reduction of quarantine. To what are you hearing from analysts in terms of whether or not this is going to be able to revive and support Hong Kong's role as a key financial center. Well, it's obviously it's Stockholm syndrome. Again, you would have to say when they cook quarantines from seven nights and three nights, that's clearly a positive. It does will lend itself towards better mobility and will help both residents and business people

getting into and out of Hong Kong going forward. But of course let's not forget where we are a relative to the rest of the world. It's still not just quarantine but several kind of layers of defense or trip wires that prohibit passengers or travelers getting tuned from Hong Kong.

So that's going to continue to drag on the mobility, on its role as a global hub, on the ability to do business with the rest of the world, especially when New York and London, Singapore have reconnected with everybody else. There is a feeling that the authorities are in the path or trajectory now that they will continue to ease barring some kind of another massive outbreak with variants, etcetera. That remains to be seen. They're obviously being very cautious

as they are. Um there is supposed to be a big financial summit in November. People looked at that and maybe a deadline for when they might ease up in the following three days and move to some kind of a PC or testing thing. But you know, operating within the political system that they are obviously on a headline basis, you would say it's a positive for Hong Kong. It's it's that they're stepping forward, but you know clearly it's a negative at the same time, we have along way

to go. All right, Well, that's how it. Penda might be able to see you in November in the Karen Bloomberg's chief Asia Economics correspondent with US in Hong Kong,