China has favorable conditions for overall price stability

People buy fruits and vegetables at a supermarket in Changchun, northeast China's Jilin Province, March 15, 2022. (Photo by Xu Jiajun/Xinhua)

China is capable of keeping overall prices in a reasonable range despite soaring inflationary pressures worldwide and fluctuations in food prices in the near term, officials and analysts said.

China's consumer price index (CPI), a main gauge of inflation, rose 2.7 percent year on year in July. The producer price index (PPI), which measures costs for goods at the factory gate, went up 4.2 percent year on year.

"In the next stage, upward pressures on consumers exist, but China still has multiple conditions favorable to the overall price stability," said Fu Linghui, an official with the National Bureau of Statistics (NBS).

STABLE GRAIN OUTPUT

The supply for the domestic market is generally abundant, Fu said, citing the bumper harvests for consecutive years and the harvest of early rice this year.

China has managed to ensure sufficient grain output to contain food inflation, which accounts for a big share of the CPI basket. The country saw its summer grain output increase by 1.435 billion kg this year and has harvested over 60 percent of its early rice, laying a foundation for a bumper harvest for the whole year.

Efforts have also been made to ensure the autumn grain output, which accounts for three-quarters of the total annual.

Despite the impacts of extremely hot weather and the flood disasters, the sown area of China's autumn grain has increased this year with a good basis for stable annual grain production, said Fu. He added that the current growth of corn, middle-season rice, soybean, and other major autumn crops is the same as last year.

"Going through rounds of tests of pandemic and extreme weather, China is rich in experience of safeguarding the supply of important livelihood commodities, adding confidence to the overall prices stability," Guo Liyan, a researcher with the Chinese Academy of Macroeconomic Research said.

FIREWALL AGAINST IMPORTED PRESSURE

In the first half of the year, many major economies have witnessed their prices reach the highest level in four decades, causing concerns about imported pressure. However, these impacts on China's consumer prices are "limited," according to Guo.

Echoing the view, Fu noted that the imported inflationary pressures are expected to ease due to the slowing global economic recovery, tightening monetary policies in major economies, and the fall in commodities prices globally.

Facing fluctuations in international energy prices, China has stepped up efforts to ensure capacity and stabilizing prices, erecting a firewall against the imported risks.

China has taken steps, including tailoring measures to ease supply-demand imbalance, ramping up market regulations, and curbing price gouging to stabilize the commodity prices. The production capacities of energy have also improved.

Thanks to these efforts, China currently has ample energy storage and supply despite some regions experiencing relatively tight supply during peak hours due to rapid economic recovery and continuous high temperatures, according to the National Development and Reform Commission.

In July, the raw coal output expanded rapidly, with about 370 million tonnes produced, surging 16.1 percent year on year, data from the NBS showed.

PRUDENT MONETARY POLICY

Aside from the efforts to stabilize the commodity and food prices, there is no monetary basis for price hikes thanks to China's adherence to not resorting to the "flood-like stimulus," Fu Linghui said.

A report released by the People's Bank of China (PBOC) last week said that the country is capable of achieving its whole-year inflation target of around 3 percent, citing stable monetary policy, high food self-sufficiency rate, and other factors.

The central bank also warned of structural inflation pressure, noting that the CPI growth might top 3 percent in a few months.

In the future, the PBOC said it would heed the price changes at home and abroad and adhere to a prudent approach in its monetary policy.

Looking into the second half, although there might be some months with sharp rises in prices, "China has conditions to keep prices generally stable for the whole year," Fu said.