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Economic Rebound Hopes to Cool Global Inflation

By China Daily|Mar 07,2023

Accommodative policies will stabilize prices, supplies of commodities, drive consumption

This aerial photo taken on Jan. 17, 2023, shows a morning view of Jingtang Port Area at Tangshan Port in Tangshan, north China's Hebei Province. (Photo/Liu Mancang, Xinhua)

According to economists and analysts, the recovery of the Chinese economy is expected to cool global inflation instead of pushing it up, and China's inflation growth and overall prices will remain tame and stable.

Robin Xing, Morgan Stanley's chief China economist, said China's reopening would help curb surging global inflation, as the normalization of economic activities will stabilize supply chains and make them function more effectively. He added that will avoid the supply shock related to global supply, one of the drivers of inflation.

Over the past year, many economies around the globe witnessed the most significant surge in inflation in 40 years due to runaway energy and food prices amid geopolitical tensions and massive fiscal and monetary stimulus that many countries adopted.

Against that background, China, the world's second-largest economy, has managed to deal with inflationary pressures with the government's effective measures to stabilize prices and supplies of daily necessities and bulk commodities.

The country's consumer price index, a main inflation gauge, rose by 2 percent year-on-year in 2022, well below the country's annual inflation target of around 3 percent, according to the National Bureau of Statistics.

Looking into the whole year, Xing said he believes inflation will not be a major concern for China in 2023, and the country will keep overall prices stable within a reasonable range.

Regarding concerns that the revival of the world's second-largest economy may push global commodity prices, Xing said China's economic rebound would mainly be driven by consumption rather than forceful infrastructure spending.

"That means China's reopening will not boost inflation via commodities, especially as the United States and Europe may suffer from weak demand this year," he said.

Considering China's abundant labor force and a solid willingness to dedicate their efforts to work, Xing said the recovery in consumption of services would not add too many inflationary pressures.

Despite substantially recovering mobility and in-person service sectors in the second half of January, China continued to print low inflation data. China's CPI increased by 2.1 percent from a year earlier in January. Meanwhile, CPI in the US climbed 6.4 percent in January.

Lu Ting, the chief China economist at Nomura, said the uptick in year-on-year CPI inflation was mainly driven by the timing of the Chinese New Year holiday, which took place in January this year and February last year.

He said his team expects China's CPI inflation to edge marginally to 2 percent in February, reflecting some pullback after the January Spring Festival holiday effects. For the full year (2023), China will target an inflation rate of around 3 percent, according to the Government Work Report delivered to the 14th National People's Congress in Beijing on Sunday.


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