The sharp rise in costs is concerning and potentially harmful for small businesses.
The National Bureau of Statistics of China recently reported that the Consumer Price Index (CPI) went up by 1.3% in May (year-on-year). The figure was below expectations of 1.6%, after being at 0.9% in the previous month.
In monthly terms, the CPI contracted by 0.2%, against expectations of 0.1% and April’s 0.3%.
The Producer Price Index rose by 9%, higher than expectations of 8.5% and the previous month's figure of 6.8%. The index, which is a measure of producer costs, rose the highest since 2008 and shows a sharp rise in costs, which is concerning and potentially harmful for small businesses.
Prices almost doubled according to the data. For the petroleum and natural gas extraction industry, costs went up by 99.1%, while costs rose by 34.3% for oil, coal, and other fuel-processers.
The Chinese government has already announced measures to help mid-sized and small businesses who are dealing with rising raw materials costs, given the huge impact those price changes are having on their economic performance.
Fears for an eventual trade war between the United States and China are also concerning Chinese producers, especially now that Biden's administration pledged to level up the trade relationship between both countries. The trade relationship with Europe is probably not going to get better anytime soon, especially now that trade talks stalled and sanctions were imposed because of human rights violation allegations.
China is also struggling with the spread of the coronavirus, both domestically and overseas. Despite officially only 91,316 individuals having been infected by the virus with only 4,636 deaths, many think the figures provided by the Chinese government are not accurate. Besides this, cases have been surging in the Chinese province of Guangdong, which has pushed local authorities to impose restrictions on businesses and to carry out mass testing. Travel restrictions were also imposed, as the government asked residents not to leave the city unless they are willing to be tested within 48 hours of their departure.
This recent surge in cases is concerning because the Indian variant of the coronavirus, which is known to spread very quickly, seems to be involved.