New data from China shows an unexpected rise in producer prices and a pickup in consumer prices. As David Pollard reports, it's welcome news for the government as it struggles with a growing mountain of corporate debt.
It's just a tiny 0.1 per cent rise on the year. But that increase in its September producer prices is enough to turn the debate over China on its head in just 24 hours. Those seeing gloom after weak trade data on Thursday now again seeing a glimmer of hope. That a pick-up in inflation confirms a pick-up in the economy. Consumer prices were also up by more than expected - a 1.9 per cent rise on the year. Analysts say the uptick will make it easier for China to service a massive 18 trillion dollar corporate debt pile. If not all of them are convinced of the underlying fundamentals. (SOUNDBITE) (English) BGC PARTNERS MARKET STRATEGIST, MIKE INGRAM, SAYING: "Yes, manufacturing seems to have stabilised, though it's not in a good place overall. Service sector is looking better, but if you look beyond the construction and real estate sectors, again it's looking quite soft. And those two sub-components are obviously a function of a mini-boom in the property market which has largely been engineered by the government." But it is the first positive move in producer prices for nearly five years. And could ease the pressure on a Chinese currency this week hitting six-year lows.