Analysts at TD Securities note that, while the headlines scream of rising inflation in China, the underlying inflation picture is extremely subdued.

• “China November CPI rose 4.5% y/y (mkt 4.3%, TD 4.4%), its highest reading since January 2012. The main contributor continues to be food (19.1% y/y) and in particular pork prices (110.2% y/y).
• The rise in pork also helped to push other meat prices higher, with for example beef prices up 22.2% y/y. However, stripping out food, CPI rose a benign 1.0%, with some areas in deflation including durable goods, transport, auto fuels and communication equipment. This was also reflected in PPI which fell 1.4% y/y.
• As such the CPI data will have little bearing on monetary policy, with PBoC likely to continue in its incremental easing path. There may also be some good news in terms of pork prices, with some moderation likely in the month ahead.”