Asia Chart Alert: China: The largest hike in the rail freight tariff since 2003
It reinforces our view that CPI inflation will rise above 3.5% in H2 and lead to two interest rate hikes.
 |
| Fig. 1: Rail freight tariff and its growth |
· Earlier today, the National Development and Reform Commission (NDRC) and the Ministry of Railway (MOR) raised the rail freight tariff by 13.0% effective 20 February 2013, from RMB0.1151 per ton-km to RMB0.1301, the largest hike since 2003.
· The tariff hike suggests that the government may move to lift other administratively suppressed prices, such as electricity and other public utilities. Energy price reform has been on the top of the government’s policy agenda since 2012, but was delayed due to concerns over GDP growth slowing. Now that growth has recovered while inflation remains low, the window for energy price reform has reopened.
· This, together with slowing potential growth and a tight labour market, supports our view that CPI inflation will rise to 3.5% for full-year 2013 (Consensus: 3.1%), rise to 4.4% y-o-y in H2 2013 and cause the People’s Bank of China to hike interest rates twice in H2. We continue to expect growth to slow from 8.1% in H1 to 7.3% in H2.
Source: NDRC, MOR, media reports and Nomura Global Economics.
No comments:
Post a Comment