Raymond Yeung, analyst at ANZ, points out that China’s inflation data for March indicate that the supply shocks faced on the consumer and producer fronts have helped to mitigate deflationary risks.

“The broad-based rebound in producer prices in March also implies an improvement investment demand. Although a decreased risk of deflation will reduce the urgency faced by China’s central bank to cut interest rates, any RRR cut will still be driven by market liquidity conditions.”

National Bureau of Statistics (NBS) said on Thursday that China's factory-gate inflation picked up for the first time in nine months in March, lifted by price rises in global commodities. Consumer inflation also quickened, jumping to the highest since October 2018 as pork prices soared due to a growing epidemic of swine fever. China's producer price index (PPI) in March rose 0.4% from a year earlier, driven largely by rapid rises in oil and gas prices, and advancing from a 0.1% increase in February. The consumer price index (CPI) in March rose 2.3% from a year earlier, a five-month high. That was more than a 1.5% increase in February