Source: Bloomberg, Unigestion. Data as at 30.09.2021.
The rise in commodity prices has impacted the profitability of the most power intensive sectors in China, as reflected by the significant rise in the Producer Prices Index (PPI) over the past year and its spread with the Consumer Prices Index (CPI) over the same period. As our chart shows, this spread, which can be a good proxy for margins, has deteriorated significantly, affecting investment prospects and potential growth. With companies struggling to pass on these rising costs to consumers, the corporate outlook in China remains a concern.
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