China factory-gate prices turn positive in March, ending 41-month decline

by XIN Yuan

China's factory-gate prices returned to growth in March after more than three years of decline, driven by rising global commodity prices, official data showed on Friday.

The producer price index (PPI) rose 0.5% year on year in March, reversing a 0.9% fall in February and snapping a 41-month streak of declines, according to the National Bureau of Statistics. On a monthly basis, PPI climbed 1.0%, extending gains to a sixth straight month.

Imported inflation was the main driver, pushing up prices in upstream sectors, NBS statistician DONG Lijuan said.

Prices for non-ferrous metal mining and processing surged 36.4% from a year earlier, while smelting and rolling rose 22.4%. Oil and gas extraction prices swung to a 5.2% increase from a 12.9% drop in February, while declines in petroleum processing and chemicals narrowed.

Some sectors also saw firmer prices. Photovoltaic equipment and lithium-ion battery manufacturing rose 5.2% and 2.5%, while strong demand linked to artificial intelligence drove a 76.1% jump in optical fiber prices.

March PMI data had already signaled rising price pressures, with input and output price gauges at their highest since mid-2022.

On a monthly basis, the 1.0% increase was the strongest in four years, led by energy-related sectors, with oil and gas extraction prices up 15.8%.

Analysts said the rebound remains largely externally driven.

WANG Qing, chief macro analyst at Golden Credit Rating, said policy efforts to curb excessive competition and strong global AI investment are supporting prices, but weak domestic demand remains a constraint.

He expects PPI growth to rise to around 0.9% year on year in April but sees limited room for a sustained increase amid ongoing property sector weakness.

ZHANG Di at China Galaxy Securities said infrastructure investment in areas such as new energy and computing power could gradually support demand.

WU Chaoming, chief economist at Hunan Chasing Financial Holdings, said the durability of the recovery will depend on whether domestic demand improves and price transmission strengthens.