SHANGHAI: China stocks closed lower on Wednesday, after data showed factory gate prices in the world’s second-largest economy rose at the fastest pace in 26 years last month, reducing the chances of a policy rate cut by the central bank in the near term.

The blue-chip CSI300 index was down 0.5% at 4,821.19, while the Shanghai Composite Index lost 0.4% to 3,492.46 points.

China’s October producer price index (PPI) climbed 13.5% from a year earlier, further squeezing profit margins for producers already grappling with soaring coal prices and other commodity costs due to a power crunch.

“The risk of stagflation continues to rise. We are concerned about the passthrough from producer prices to consumer prices,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“The passthrough will likely become more visible in coming months and push up the CPI. This may limit the room of monetary policy easing by the PBoC (People’s Bank of China) in 2022.”

Coal firms, new energy shares and consumer staples lost between 1.7% and 2.2%.

Property developers climbed 5%, the biggest intraday jump since October.

A state-backed daily reported that some real estate companies disclosed plans to issue debt in the inter-bank market at a meeting on Tuesday with China’s inter-bank bond market regulator.

The real estate sector lost more than 15% in the past two weeks due to tightened policy, liquidity woes and a planned real estate tax scheme.

Overseas investors were heavy net sellers of A-shares on Wednesday, with Refinitiv data showing outflows of more than 8.4 billion yuan through the Northbound legs of the Stock Connect programme.