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China December producer prices hit five-year highs

China's economy on the mend as producer prices rise to 5-year highs in December.

China's producer prices rose in December at their fastest pace since September 2011 on strong raw material prices, signalling stabilization in the world's second largest economy.

Producer prices rose 5.5 percent from a year ago in December, higher than a Reuters analyst forecast of 4.5 percent, according to Chinese government data.

The Producer Price Index (PPI) was up 1.6 percent from November. Producer prices had slumped in recent years amid excess capacity in many industries and a slowdown in global growth.

"The PPI returning to positive is a kind of stabilization that can help industrial profits to improve; that can alleviate some of the liquidity pressure of corporates," said ANZ's chief economist for Greater China, Raymond Yeung.

ANZ expects 2017's full-year PPI to be at 2.5 percent.

Consumer price inflation eased to 2.1 percent from a year ago in December, compared with a Reuters analyst poll of 2.3 percent.

Yeung told CNBC's Squawk Box the overall conclusion from the data release on Tuesday is that "deflation is over", a trend analysts say could lead to less aggressive monetary policy.

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He expects the People's Bank of China (PBOC) to hold a neutral position in its monetary policy as it pushes for structural reforms, such as tackling leverage in the property sector.

"The bottom line is that as long as the Chinese government is able to prevent deflation, (they can) buy time in order to fix some of the structural problems such as overcapacity, the economic outlook of China is not entirely pessimistic," he said.

China is expected to release its closely watched full-year growth figures next week.

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