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China's Rust-Belt Rebound Is Under Threat From Slowing Inflation

  • Factory-price surge lifting industrial regions is due to turn
  • Chongqing’s robust growth slows amid a national acceleration

China’s former industrial heartland is being helped out of its economic malaise by surging producer prices and government spending. Those supports may be about to weaken.

Two of the biggest laggards posted turnarounds in the first quarter. Growth returned to Liaoning, the heavy-industry base in the northeast, where gross domestic product expanded by 2.4 percent, compared to the 2.5 percent contraction in the same period last year. Shanxi, the northern coal-mining province mired for years in producer-price deflation and excess capacity, grew 6.1 percent versus 4.5 percent in 2016.