Standard Chartered economists Hunter Chan and Shuang Ding argue that higher Oil and AI-related goods prices have lifted China’s import prices and PPI, ending a multi-year deflation spell. However, they stress that China’s export prices have risen more slowly than import prices and key trading partners, so China remains a disinflationary force, with current cost-driven reflation likely milder than in 2021-22.

Export prices lag import cost pressures

"China’s import prices have been rising y/y since September 2025. Both industrial purchase prices and PPI turned positive in March and jumped in April and May, ending deflation that lasted for more than three years. The price increases were mainly driven by higher upstream metal prices and electronic product prices on higher global AI demand and petrol-related prices amid the Middle East conflict."

"Meanwhile, the official export price index rose to a near three-year high in April, raising concerns that China may start exporting inflation to the rest of the world. However, the rise in export prices has consistently lagged import prices in both timing and magnitude terms in recent years."

"The cost pass-through appears to be concentrated in upstream sectors. PPI inflation is much softer in manufacturing than mining and raw materials, and consumer goods PPI remains in deflation."

"China’s overall export price growth has also lagged that of key trading partners, indicating that its exports continue to mitigate global inflation. The exception is China’s IC export prices, which have outpaced IC import prices amid the global AI investment boom."

"Cost reflation is likely to be more moderate this time than during the 2021-22 reflation period, which was also characterised by higher oil and metals prices. For one, the current period does not share the ultra-low base of the previous period (due to COVID disruptions). Second, domestic demand is softer compared with the post-COVID global demand recovery, as indicated by declining manufacturing capacity utilisation rates."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)