CPI and PPI

China’s consumer prices increased 1.9% year over year in October compared with 1.6% in September and above expectations of 1.8%, per the National Bureau of Statistics (NBS). It is still way behind China’s target of 3%.

Food prices fell 0.4% year over year compared with a decline of 1.4% in September. Non-food prices grew 2.4% year over year, same as September.

The bureau also added that producer prices increased 6.9% year over year in October, unchanged from September and above expectations of a 6.6% increase.

Economic Scenario

Chinese factory activity slowed in October 2017. The country’s official manufacturing purchasing managers’ index (PMI) fell to 51.6 in October from 52.4 in September.  

China’s National Bureau of Statistics said that the country’s GDP grew 6.8% year over year in the third quarter compared with 6.9% in the second quarter.

The slowdown in factory activity is a major concern. China’s production curbs to crack down on pollution have affected energy and pollution-intensive companies and have added to their cost pressures.

The Chinese government has been facing challenges of curbing property market speculation and high debt. The government’s crackdowns on financial risks led to a slowdown in economic activity in some parts of the country. S&P downgraded China’s sovereign rating to A+ from AA- and revised its outlook to stable from negative.

Although the twice-in-a-decade Congress meet led to some calm in the Chinese markets initially, deleveraging concerns weighed on the stocks, owing to a slew of poor economic data. The policymakers indicated their shift of agenda to crackdown on pollution and financial risks from economic growth at any cost. China is also subject to geopolitical risks as Asian markets suffer from massive volatility due to North Korea’s actions.

Let us now discuss a few ETFs focused on providing exposure to the Chinese economy.