A consumer picks vegetables at a supermarket in Shijiazhuang, Hebei province, on Feb 10. [PHOTO by JIA MINJIE/FOR CHINA DAILY]
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, according to economists and analysts.
Robin Xing, Morgan Stanley’s chief China economist, said China’s reopening will 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 biggest 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 gauge of inflation, 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 full 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.
When it comes to concerns that the revival of the world’s second-largest economy may push up global commodity prices, Xing said China’s economic rebound will 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 their strong willingness to dedicate their efforts to work, Xing said the recovery in consumption of services will not add too many inflationary pressures.
Despite a strong recovery of mobility and in-person service sectors in the second half of January, China continued to print low inflation data. In January, China’s CPI increased by 2.1 percent from a year earlier. Meanwhile, CPI in the US climbed 6.4 percent in January.
Lu Ting, 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.
Looking forward, he said his team expects China’s CPI inflation to edge down marginally to 2 percent in February, reflecting some pullback after the January Spring Festival holiday effects.