- Expensive raw materials threaten growth
- Navy advances into western Pacific
- Maas criticizes vaccine diplomacy
- World Bank predicts growth of 8.5 percent
- Increase in electricity prices for households
- Illegally imported jade from Myanmar
- Guangzhou to build quarantine hotel
- Portrait: Tania Becker – Sinologist with an interest in technology
Surveys confirm: few things frighten Germans more than rising living costs. Inflation in Germany is currently over two percent – which is still moderate, but higher than we have been used to recently. Some of this comes from China via detours and is caused by high raw material prices. China is the largest importer of raw materials. The country’s industry processes them into intermediate and end products. More and more small local companies are now suffering from rising prices, analyzes Christiane Kühl. Some economists even see the upswing at risk. The government is now intervening and throwing some of the strategic raw material reserves onto the market.
The military strategy in the Indo-Pacific is clear: China is steadily expanding its sphere of influence. Frank Sieren analyses the motives behind the Chinese navy’s latest maneuver. It has entered the Celebes Sea between Indonesia and the Philippines for the first time. And weapons development is also a cause for concern: China has developed a new anti-aircraft carrier missile with a range of around 1,800 kilometers – double that of the previous version.
Expensive raw materials jeopardize growth
China is struggling with the rapidly rising prices of raw materials. Metals, ores, crude oil – everything has become extremely expensive. The price hike is putting a strain on the country’s industry, which should actually be running at full speed again after the end of the pandemic. Beijing will therefore release a total of 100,000 tons of stockpiles of non-ferrous metals at the beginning of July. The Food and Strategic Reserves Administration said it would publicly auction 20,000 tonnes of copper, 30,000 tonnes of zinc, and 50,000 tonnes of aluminum on July 5 and 6. According to the statement, copper and zinc will be auctioned on a platform run by state-owned metals company China Minmetals, while the aluminum will be auctioned on a platform run by state-owned Norinco. Only companies that process these metals will be allowed to bid. According to official data, the amount of zinc to be auctioned corresponds to 5.7 percent of China’s monthly production in May.
The unusual step shows how dramatic the situation has become for China’s industry. High commodity prices are raising costs for producers – and thus prices for finished products. Ex-factory price inflation hit a 13-year high in China in May, according to the National Bureau of Statistics, as manufacturers passed on rising raw material prices to their customers. Nearly 100 Chinese steel companies, for example, raised prices in early May due to increased costs in purchasing iron ore.
Threat to economic recovery
The producer price index (PPI), which reflects the prices factories charge wholesalers for their products, rose nine percent year-on-year in May (China.Table reported). “In May, prices of international crude oil, iron ore, non-ferrous metals, and other bulk goods rose sharply,” said NBS senior statistician Dong Lijuan. Following the end of the pandemic in China, economic demand also surged, further pushing up prices across the board – and could subsequently cause inflation in the consumption sector. Beijing, therefore, fears that the explosion in commodity prices will jeopardize the entire economic recovery.