Key highlights

• Compared with relatively soft rates at the start of the year, China’s consumer price inflation has accelerated in recent months. The key contributor to this upturn has been the price of pork – a key component of the Chinese diet and a culturally significant product – due to a major disease outbreak. The People’s Bank of China is not an explicitly inflation targeting organisation, meaning that the likely prolonged impact of pork shortages on inflation may not constrain monetary policy.
• Given that monetary policy is unlikely to impact the fundamentals of the pork market in the short term, we argue that the PBoC should place greater weight on economic pressures other than pork prices, particularly given the weaker trends in non-food price inflation, the softness in the industrial sector and the impact of the US-China trade.

For further details, please see the NAB China Economic Update – September 2019