China Factory Inflation Holds Up on Steady Demand, Capacity Cuts

China’s producer price gains held steady on surging commodity prices, as demand stayed resilient and the government’s drive to reduce industrial capacity takes hold.

Soaring prices of commodities such as coal, steel and cement extended a sweet spot for industrial firms, which have enjoyed solid profits and, through China’s massive supply chains, have underpinned global reflation since last year. The government’s drive to reduce industrial capacity capped supply of raw materials while demand from property and infrastructure projects has held up so far.