-Li Huiyong, an economist at Shenyin & Wanguo Securities
China's consumer inflation climbed slightly in June, whereas stubbornly weak producer prices dropped again, sparking concerns about a sluggish Chinese economy, which is also struggling due to a stock market rout. China's consumer price index rose 1.4% in June from a year earlier, a slight pickup from the 1.2% year-over-year rise in May, according to the National Bureau of Statistics. This marks the tenth straight month that consumer inflation has remained below 2%. The producer price index, however, plunged 4.8%, worse than forecasts for a 4.5% fall and after a 4.6% decrease in May. This marks its 39th successive month of decline. The ongoing PPI deflation indicates that overcapacity remains a serious threat and the process of deleveraging has a long way to go.
The People's Bank of China trimmed its benchmark interest rates in late June, its fourth rate cut since November, a day after the Shanghai and Shenzhen stock markets plummeted more than 7%. Despite the monetary policy easing and a slew of other subsequent emergency measures, China's stock markets have continued their precipitous freefall. Both the Shanghai and Shenzhen index have lost more than 30% of their market capitalisation since their June peak, though both markets still remain in positive territory for the year.
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