While downstream price pressures are clearly building, Li suggests that based on historic evidence, the pass-through to consumer prices is usually limited in scale, something he believes will allow China's central bank, the PBOC, to focus on other more pressing issues for the Chinese economy in the year ahead.
The Producer Price Index, which measures costs for goods at the factory gate, gained 5.5 percent year on year in December, the highest since September 2011, the National Bureau of Statistics said in a statement yesterday.
That is boosting profits for China's heavily indebted smokestack industries, which are largely state owned, and generating more cash flow to help pay off their loans. Also, the demand for industrial products recovered.
Consumer inflation rose 2.1 percent on-year, missing expectations, as food prices rose at a more modest 2.4 percent pace. The yuan depreciated 6.5 percent against the USA dollar a year ago, making imported commodity prices more expensive.
The reading for factory gate prices came in faster than economists' median forecast for a 4.8% increase.
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Hopes of stronger spending under Trump are sparking expectations of stronger USA economic growth and inflation which more interest rate hikes from the Federal Reserve. In November, it rose 1.5% from the month before.
On a monthly basis, inflation added 0.2% after gaining 0.1% a month earlier.
"High commodity prices will delay the government effort to deal with over capacity", Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd.in Hong Kong.
The increase picked up from 3.3 percent in November and 1.2 percent in October.