China's factory-gate inflation gained momentum in April, with producer prices rising 2.8 percent from a year earlier. This represents the fastest pace of growth since July 2022 and the quickest increase since the pandemic four years ago.
The surge is fueled by geopolitical tensions in the Middle East and the fallout from the Iran war, which have sharply raised costs and kept energy prices elevated. This trend effectively cements the end of a nearly four-year deflationary cycle.
China's central bank has warned of risks regarding imported inflation resulting from higher commodity and oil prices driven by the Middle East conflict. To mitigate these impacts, the country has cushioned the worst of the energy shock using a diversified mix of renewable energy sources and strategic oil stockpiles.