On June 15, consumers purchased fruits in a supermarket in Guizhou. Xinhua News Agency reported that international inflation has risen rapidly since 2022. The consumer price index (CPI) of the United States and the United Kingdom in May increased by 8.6% and 9% year-on-year respectively, continuing to hit a 40-year historical high. Yang Yiyong, director of the National Development and Reform Commission's Institute of Market and Price Research, and Liu Fang, deputy director of the Commodity Research Office of the National Development and Reform Commission's Institute of Market and Price Research, wrote that global inflation "will not subside" and China has become the backbone of the world economy. Systemically key countries are increasingly playing an important role as global price stabilizers.
System perspective
Price levels are operating within a reasonable range
China's annual CPI average increase in 2021 was 0.9%. In May 2022, the CPI increased by 2.1% year-on-year and decreased by 0.2% month-on-month. PPI has fallen for seven consecutive months. In May, the PPI increased by 6.4% year-on-year, significantly lower than other major economies.
Zhang Zhe said that from a theoretical point of view, macroeconomics is a complex system in which various production factors, economic activities, and market entities are interdependent and influence each other. Price stability is not only an important external manifestation of macroeconomic stability, but also requires the stable operation of this system as a premise and condition. Looking back on the history of world economic development in the past 30 years, , when a country's macro economy is stable, the price level is often relatively stable; but when it encounters external shocks, economic overheating or stalling, drastic changes in the international balance of payments, exchange rate substantial fluctuations, etc. In this situation, prices tend to fluctuate sharply. It can be said that the stability of global prices is inseparable from the stability of the world economy, and China is precisely the source of stability of the world economy.
In recent years, China's economy has maintained medium-to-high growth, operating within a reasonable range. It was the first to achieve positive growth after the epidemic, and has contributed considerable increments to the world economy every year. China attaches great importance to the development of the real economy, strives to improve the quality and efficiency of manufacturing development, and promotes common development with other countries around the world through high-level opening up and the joint construction of the "Belt and Road" initiative. China implements responsible macroeconomic policies, does not engage in flooding, strives to prevent and resolve major risks, improves food security, energy security, etc., and deepens macroeconomic policy coordination with the world's major economies. In a recovery environment where the epidemic of the century and the changes of a century are intertwined, what China exports to the outside world is rare stability, not troubles and crises. As a large country with a population of 1.4 billion, the smooth operation of China's macroeconomy itself is an important contribution to world economic development and global price stability.
Supply and demand relationship
China's exports of goods calm world inflation pressure
China is the main trading partner of more than 120 economies and the largest exporter of more than 60 countries. It occupies an important position in the global industrial and supply chains. The
article pointed out that China, on the one hand, took the lead in resuming work, production, markets, and sales, which has contributed to maintaining the stable operation of the global supply chain. On the other hand, we should actively respond to imported inflationary pressures, give full play to the role of the mechanism to ensure supply and stabilize prices, and strive to achieve self-internal digestion of international imported price increases, so that the transmission of rising raw material costs to terminal export commodity prices is very limited, and to a certain extent This has eased the upward pressure on global inflation.
It is worth noting that, unlike oil, natural gas , iron ore and other energy and mineral products, the global industrial manufactured products market is fully competitive. There are a large number of basically homogeneous suppliers in this market, and any supplier If a manufacturer raises prices alone due to cost factors, it will only lead to a decline in sales, thereby damaging profits. China's export commodities are mainly industrial manufactured products. When export companies face pressures such as rising labor costs, continuous strengthening of resource and environmental constraints, and sharp increases in energy and raw material prices, they have to rely more on improving efficiency, optimizing management, improving processes, Accelerating technological progress and other "internal strength" can help to offset the compression of profits caused by the rising cost of , but it is difficult to simply increase the product selling price and pass on the rising costs. At least to a certain extent, it can be said that the hard work of China's export enterprises has calmed down the inflationary pressure caused by the rising prices of energy resources commodities to countries around the world.
In recent years, economic globalization has encountered greater headwinds and backlash, but the general trend of in-depth development has not changed. China has the most complete and largest industrial system in the world. It is the only country in the world that has all 41 major industrial categories, 207 intermediate industrial categories, and 666 small industrial categories in the United Nations industrial classification. The output of more than 220 industrial products ranks first in the world. First, it is an important node in the global industrial chain and supply chain, and is also the largest trading partner of more than 120 countries and regions. As China's domestic epidemic gradually subsides, its strong production capacity and diversified open platforms will surely make new and greater contributions to global price stability.
Monetary policy
Contributing to stabilizing global prices
Since the outbreak of the epidemic, developed countries led by the United States have resumed large-scale quantitative easing monetary policies in order to stabilize the economic situation, issuing a large amount of base currency to purchase assets such as government bonds. By the end of January 2022, the U.S. national debt exceeded the US$30 trillion mark for the first time, which was 1.3 times the nominal gross domestic product (GDP) in 2021, a surge of US$7 trillion compared with before the epidemic. In recent years, the financial attributes of commodities have become increasingly stronger. Excess liquidity combined with geopolitical and other factors have pushed up commodity prices, bringing great imported inflation pressure to energy resource importing countries.
During the period of epidemic prevention and control, China emphasized that monetary policy should be flexible and appropriate and maintain reasonable and sufficient liquidity. The macro leverage ratio is the ratio of a country's total non-financial sector debt to GDP, which reflects a country's overall debt situation and is also an important indicator to measure whether monetary policy is reasonable and appropriate. In 2020, in response to the economic downward pressure brought by the epidemic, China's macro leverage ratio increased. As the economic situation improved in the fourth quarter of that year, the macro leverage ratio turned from increase to decrease, and has maintained a continuous downward trend since then, reaching 272.5% by the end of 2021, 7.7 percentage points lower than the end of the previous year. Not only is it lower than the level in developed countries during the same period, it is also lower than the level in 2009 when responding to the international financial crisis.
Taken together, the reason behind the increased inflationary pressure in various countries around the world is the quantitative easing monetary policy implemented by developed countries, which not only boosted domestic demand, but also led to an increase in international commodity prices, coupled with the epidemic and geopolitical conflicts. and other non-economic factors have made the relationship between supply and demand continue to be tight, ultimately pushing up the price level. Recently, in response to high inflation, central banks in developed countries have started the process of raising interest rates, which has brought new risks to the world's economic and financial stability. China has always implemented responsible monetary policies, which not only promoted domestic economic recovery and price stability, but also made special contributions to global price stability.
Interviewed and written by: Nandu reporter Ding Jingxuan and trainee reporter Zhao Weijia
