Is China’s Inflation on the Rise? Assessing Capital Flow Shifts

On Monday, the stock market witnessed signs of market exhaustion on Wall Street and Chinese inflation rates that affect Asian markets. Meanwhile, the potential policy shift by the Bank of Japan which could affect Nikkei 225 and Yen now builds anticipation among the people. 

At this stage, Asia’s economic calendar is light, except for the final report on Japan’s GDP for the fourth quarter. According to a survey by Reuters, the economy didn’t go through a technical recession due to companies spending on factories and equipment more than expected.

China’s inflation report from Saturday shows a significant increase in consumer prices, exceeding expectations, however, producer prices continued to decline, marking it as the 17th consecutive month that prices have declined on a yearly basis. 

Consumer inflation reached 0.7%, the highest level in almost a year, showing a potential shift away from deflation. On the other hand, the producer price index dropped by 2.7% year-on-year, surpassing forecasts, and maintaining negative pressure on pipeline prices.

The shift to positive territory reflects January’s 0.8% dip, the most significant drop in over 14 years. This decline was due to a higher statistical base in January 2023, as the Lunar New Year occurred earlier that month resulting in increased spending. 

Meanwhile, the Asian stock markets are mostly lower today, March 11. Japan’s Nikkei 225 went down by 2.19% closing at 38,820.49. Hong Kong Hand Seng index went up by 0.9% closing at 16,498.79, while the Shanghai Composite declined by 0.1% closing at 3,043.67

South Korea’s Kospi index also went down by 0.7% from its previous ATH, closing at 5,123.69 while Australia’s S&P/ASX 200 index also declined by 1.5% closing at 7,727.60.