Guolian Aquatic announced the company plans to raise prices on some of its products to cope with higher costs.
Speaking on a popular Chinese investor relations portal, Guolian Aquatic Company Secretary Zheng Quan Zhi Xing said the company will be raising prices, even as research suggests that Chinese companies are seeking to make up for weak demand domestically by increasing prices on exports.
Guolian’s move follows a series of price increases by feed companies and suppliers of other inputs, like fuel to the aquaculture sector in the past year. China’s government, meanwhile, has formally and informally sought to intervene and limit price increases through controls on the state-run energy sector.
Inflation in China remains less significant than in major western economies, in part due to continuing lockdowns. A sharp increase in food prices drove China’s overall consumer price inflation up from 0.9 percent year-on-year in February, to 2.1 percent in April. Food prices shot up from negative territory (down 3.9 percent) in February to an increase of 1.9 percent in April.
However, China’s core consumer price inflation, which removes certain items that are volatile month to month, was lowered from 1.2 year-on-year in January to 0.9 percent year-on-year in April, according to data from the National Bureau of Statistics – a slump that economists have attributed to reduced demand, with many cities locked down to contain COVID-19.
Guolian’s Q1 financial reports indicate 50 percent of its sales came from the domestic market last year, and 34 percent of its exports went to the U.S. market.
Guolian’s price increases may be part of a wider trend – Chinese exporters appear to be compensating for weak demand at home by lifting prices to export customers, according to research by French investment bank, Natixis.
Export prices are “increasing much faster than China’s domestic prices, even when compared with downstream producer prices,” a recent research report by Natixis’ office in Hong Kong noted. “Chinese manufacturers seem to be keeping a wider margin when exporting than at home,” it suggested.
Growth in China’s exports is increasingly explained by price increase, and not so much volume, Natixis said.
“While China is experiencing lower core inflation due to the weakening domestic demand, producers are raising prices of final goods, as shown by downstream prices, especially when these goods are exported,” the report said, suggesting that the price increases are partly down to increased logistics and transportation costs associated with China’s COVID-19 lockdowns.
The new trend contrasts with China’s past role – being a low-cost manufacturer – as a buffer for global inflation pass-through.
“Associating China with disinflation pressures thanks to its low export prices does not seem to be the case anymore,” the Natixis report said. “Expecting deflationary push from China for the rest of the world is clearly a story of the past.”
Photo courtesy of Guolian Aquatic
