Nanfang Daily, Nanfang Plus:

In October, the month-on-month PPI turned from flat last month to an increase of 0.1%, marking the first monthly rise this year, and the year-on-year decline in PPI being further narrowed. What factors contributed to this change, and what is the outlook for the PPI going forward? Thank you.

Fu Linghui:

Thank you for your questions. Recently, producer prices have shown some positive changes. This year, due to multiple factors, producer prices had generally been declining. As policies to boost domestic demand have taken effect, production capacity governance in key industries has progressed, and new growth drivers have gradually strengthened. Producer prices have shown improvement since August, with the year-on-year decline continuously narrowing. In October, the PPI continued to improve. The producer prices fell 2.1% year-on-year, a narrowing of 0.2 percentage points from the previous month, while month-on-month PPI rose 0.1%, the first monthly increase of the year. 

The month-on-month PPI increase in October was mainly the result of a combination of factors: regulation of market competition order, increased seasonal energy demand, and the pass-through effect of rising international non-ferrous metal prices. The narrowing of the year-on-year decline in October was primarily driven by several factors.

First, measures to stimulate consumption have shown results. This year, we have intensified trade-in programs for consumer goods, and expanded supply of higher-quality consumer products to meet upgrading demand, which has released potential for cultural, sporting, and premium consumption, and supported price increases. In October, prices for handicrafts and ceremonial goods manufacturing rose 18.4% year-on-year, prices for sports ball manufacturing rose 3.3%, and prices for nutritional food manufacturing rose 2.1%.

Second, new growth drivers are becoming stronger. With an accelerated green transition, the new energy industry has developed rapidly and demand for power batteries and energy storage facilities has expanded, driving up related raw material prices. In October, the prices of non-ferrous metal smelting and rolling processing industry increased by 6.8% year-on-year, and the prices of electronic special materials manufacturing increased by 2.3%. As China's industrial upgrading improves and information and communication industry develops well, the demand for transportation equipment such as ships and airplanes is expanding, driving up prices. In October, the prices of microwave communication equipment rose 1.8% year-on-year. The prices of ship and related device manufacturing increased by 0.9% and aircraft manufacturing by 0.5%.

Third, efforts to scale down over capacity in key industries have taken effect. The development of a unified national market has been advanced, the market competition order in key industries has been regulated, which have also driven price improvements in related industries. In October, the year-on-year price declines of photovoltaic equipment and components manufacturing industry, battery manufacturing industry and automobile manufacturing industry narrowed by 1.4, 1.3, and 0.7 percentage points respectively compared with the previous month.

On the whole, the PPI operation has shown positive changes, which is conducive to improving business operations and promoting economic circulation. In the next stage, we will continue to expand domestic demand, unleash consumption potential, increase effective investment, strengthen innovation-driven development, regulate market competition order, advance capacity governance in key industries, and promote a reasonable rebound in industrial product prices. Thank you.