Chinese factories raise their prices

**Bisi Adibayo** (0:01)
The cost of making goods is rising, but Chinese consumers are still spending cautiously. It's World Business Express from the BBC World Service. I am Bisi Adibayo. Also, Australia and India agree a new uranium export deal, and Volkswagen considers what could be the biggest restructuring in its history.
So China's factory gate prices, the prices manufacturers receive for their goods before they reach the shops, rose sharply in June, as conflict in the Middle East pushed off energy costs. But with Chinese shoppers still spending cautiously, price rises haven't hit consumers just yet. I can speak in to Ginny Yan, Chief China Economist at ICBC Standard Bank in London.

**Ginny Yan** (0:50)
There's not a huge amount of income growth. So when we compare with maybe Chinese consumers, with US consumers, the difference there is that the incremental growth in terms of take home pay or income growth is not strong enough to justify spending a little bit more consistently or with a little bit more conviction. One of the reasons for that is that obviously with China's growth still very much supported by the new economy, and by that I mean the tech sector, AI, that has not yet filtered down to everyday take home pay.

**Bisi Adibayo** (1:32)
And why is that? Because really you say this is a tech boom, there's a huge demand for AI, the semiconductor industry as well.

**Ginny Yan** (1:40)
So a little bit different again to Western peers, where tech industry tends to be private sector driven. In China, it's very much state led. So the differentiator between whether it's a tech sector or a renewable energy sector in China is that a lot of what's being produced is very cheap. So the disinflationary impact of those new sectors means that whether those workforce is involved in these industries, it's not able to be filtered down to the larger population of the workforce and the labor force.

**Bisi Adibayo** (2:18)
And at the same time, we're seeing factories facing higher costs as well.

**Ginny Yan** (2:23)
One of the key characteristics in the latest June data is that the PPI remains relatively elevated, even though producer price index has been traditionally deeply negative, right? So disinflationary. And that is because lower commodity prices. But everything changed with the disruptions in the straight up home wars because of course we know it's not just oil, it's everything. Because that had an impact on every single commodity that were disrupted because of the shortage of a lot of raw materials. We are not yet at the end of the current crisis because as we know, there has been flare up of events in the straight up home wars too. So we're nowhere near the end of this current geopolitical event or the risk of it happening one more time, which means that we may still see elevated commodity prices.

**Bisi Adibayo** (3:17)
Ginny Yan from ICBC Standard Bank in London. Well, let's talk oil prices now because they're back on the move with renewed hostilities in the Middle East. Nicholas Hyatt is with Hargrove's Lands Down. Nicholas, oil prices have risen this week, but they're nowhere near their highs. So what's going on?

**Nicholas Hyatt** (3:35)
Yes, so they spiked 5% yesterday, but oil prices have actually come down a touch today.
And Brent Crude is currently trading a little under $78 a barrel, which is well below the peak of $120 a barrel we saw earlier in the conflict. That's a remarkably calm reaction, given what's going on. I think it tells you the market feels reasonably comfortable at this stage of the conflict is going to be quite short lived, or at least either party is likely to take a step back from the brink.

**Bisi Adibayo** (4:03)
Away from oil, AstraZeneca is also in the news because their shares have dropped after disappointing trial results for one of its hurts treatments. Why have shares fallen so sharply on this news?

**Nicholas Hyatt** (4:16)
So, new drug Quenua didn't reduce deaths in its most recent late stage trial.
As you say, that's not 9% of the company's share price. The drug is still approved to treat another hereditary disease, but the failure means that sales are likely to peak at around 4 billion rather than 6.5 billion. This is an inherent risk in pharmaceutical companies. They can spend millions on development, tens of millions on trials, and everything falls apart at the last minute. AstraZeneca is not the first pharma company to face this problem, and it definitely won't be the last.

**Bisi Adibayo** (4:45)
Many thanks, Nicholas Hyatt of Hargraves and Lansdale.
Australia and India have agreed to export Australian uranium exclusively for India's nuclear energy sector. The two nations agreed to expand collaboration in renewable energy, critical minerals and green hydrogen. The countries had agreed to nuclear cooperation in 2014, but uranium exports had been limited to ensure nuclear fuel is used solely for peaceful purposes. And in Germany, the autogiant Volkswagen's management is meeting to thrash out plans for the biggest ever restructuring in the country's auto industry. VW is already cutting 50,000 jobs in Germany and its management now wants to double that. Alexander Demling is the car industry correspondent for the magazine Der Spiegel.