The Chinese authorities have decided to resort to methods of fighting price increases, which have been implemented in Russia since the end of last year. National producers have been ordered to contain the cost of raw materials, including ore and coal, Nikkei Asia writes.
China is the largest consumer of iron ore and copper, whose prices have skyrocketed this year due to demand for manufactured goods amid the global economic recovery from the pandemic. The National Development and Reform Commission (NDRC) on May 23 demanded that the country’s leading producers not raise prices for copper, coal, steel and iron ore.
“Normal production and sales in China’s metallurgical industry have already been disrupted, leading to higher prices. The high cost of raw materials negatively affects the country’s economy. In particular, the rise in the price of copper has led to a reduction in metal production, “- explained the representative of the NDRC.
The authorities will increase supervision over commodity futures and the spot market (with delivery within two days of the transaction) to exclude the possibility of price collusion by commodity speculators, whose activities further inflate the demand for raw materials and lead to global inflation.
After the announcement of the NDRC, prices for metals on the Chinese commodity exchanges fell sharply. The most traded iron ore futures on the Dalian Stock Exchange fell 9.5 percent, while copper and aluminum futures on the Shanghai trading floor lost more than 2 and 4 percent, respectively.
“Rising commodity prices are fueling inflation, which is a concern for the authorities as the disposable income of China’s population has not returned to pre-pandemic levels. Inflation is also provoked by the fact that commodities have been repeatedly used as collateral to increase leverage, ”said Alicia Garcia Herrero, chief economist for the Asia-Pacific region at investment bank Natixis.
A similar scenario, according to which President Vladimir Putin demanded price containment from domestic producers, started in Russia in December 2020. The first restrictions affected the basic foodstuffs – sunflower oil and sugar. The Kremlin has recognized the measures as effective and plans to extend them to eggs and pasta. At the same time, the spending of Russians speaks of the opposite – in the very first month after the decree, the expenses of residents of the country on one-time purchases of five categories of goods rose sharply by 1.5-4 percent.
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source https://pledgetimes.com/the-chinese-authorities-decided-to-fight-the-rise-in-prices-using-russian-methods/
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