Since the 1990s, China has been a one-country check on global inflation. The intense competition from its factories drove a race to the bottom for costs everywhere.
Until now. China’s factory-gate inflation is surging at the fastest pace since 2008, just as prices heat up throughout the West. This raises the specter that the top two economies will suddenly face overheating risks.
In May, Chinese producer prices jumped 9% year-on-year, an acceleration from an already high 6.8.% rate in April. The biggest increases were in chemicals, metals and oil, but cost increases are spreading to raise the odds Chinese exporters will begin passing higher costs first to consumers – and then to the world.