China Sees Increase in Factory Prices for First Time in Over 3 Years

(MENAFN) China's producer prices turned positive in March for the first time in three and a half years, as the conflict ignited by US and Israeli strikes on Iran drove global commodity and energy costs higher, feeding directly into domestic prices through imported inflation, official data showed Friday.

China's National Bureau of Statistics reported that the producer price index (PPI) climbed 0.5% year-on-year in March, ending 41 consecutive months of decline stretching back to the final quarter of 2022. The consumer price index (CPI) rose 1% over the same period.

Dong Lijuan, a senior statistician at the National Bureau of Statistics, said rising global commodity and energy prices caused by the Middle East war had pushed up prices across a wide range of industries and helped limit declines in others, describing the increase in producer prices as the result of imported inflation.
Dong added that state measures to rein in excess industrial capacity and curb aggressive price-cutting had improved domestic supply-demand conditions, adding further upward momentum to producer costs.

The turnaround is striking in scale. China's PPI had been mired in contraction for three full years, shedding 3% in 2023, 2.2% in 2024, and 2.6% in 2025 — with declines of 1.4% and 0.9% recorded as recently as January and February of this year.

Consumer inflation, meanwhile, registered 1% year-on-year in March, following a 1.3% gain in February — the strongest in three years. The CPI had remained below 1% since 2023, with annual inflation at just 0.2% in both 2023 and 2024 and flat throughout 2025. In recognition of the prolonged deflationary environment, Beijing last year trimmed its annual inflation target to 2%, down from the customary 3%.

At the heart of the energy shock lies the Strait of Hormuz, a chokepoint whose disruption has reverberated through global markets. The waterway — linking Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, and Iran to international buyers — carries roughly 25% of global oil trade, 20% of liquefied natural gas shipments, and approximately 30% of global fertilizer trade. For China specifically, around 45% of imported crude oil and 30% of LNG imports transit the Gulf and the strait, making the country acutely exposed to any sustained supply disruption.

Tehran's retaliatory actions in the Gulf following the US-Israeli strikes have severely curtailed tanker traffic through the passage, stoking supply fears and keeping energy prices elevated across world markets.

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