Yicai:

The producer price index (PPI) soared by a record high of 10.7% in September. What are the reasons for that? How do you view the trend of PPI in the coming quarter? Thank you.

Fu Linghui:

Thank you for your questions. The price change has received widespread attention. Since this year, the faster expansion of PPI can be attributed to the the combined impact of sharp price rises of international bulk commodities, increased domestic demand due to economic recovery and the tight supply of some products. In the first three quarters, PPI increased by 6.7% year on year, up by 1.5 percentage points compared with the first half of this year (H1). From the key features, the rising prices of the means of production is one of the major factors driving the rise of PPI. In the first three quarters, the prices of the means of production rose 8.9% year on year, up by 2.1 percentage points compared with H1. The prices of the means of subsistence rose by 0.2% year on year, up by 0.1 of a percentage point compared with H1. In terms of industry, price rises in petroleum, chemicals, coal and metal have had a large impact. Due to the rising prices of international crude oil, the prices of domestic petroleum and chemical-related industries rose by 10%-30% in the first three quarters, faster than that of H1. Driven by lower supply, the prices of the coal and metal-related industries increased as well. In the first three quarters, the prices of coal-related industries and the steel and non-ferrous metal-related industries rose by more than 30% and 20%, respectively.

Looking at the most recent period, we can see that due to the continuous rise in international energy prices and the tight supply of some domestic raw materials, the PPI may continue to run at a high level. However, in the medium and long term, with gradual improvements in global energy supply and shipping conditions as well as an increase in domestic product supply, the PPI is expected to gradually stabilize. It should also be noted that faced with the expansion of PPI growth and the increase in difficulties for production and operation of enterprises, relevant departments have actively taken measures to ensure supply and stable prices, and the effects will gradually become noticeable. In some areas, in the third quarter, the price increase of the steel and non-ferrous metals industries dropped by 3.3 and 3.8 percentage points respectively from the second quarter. Thank you.