China has room to manoeuvre on monetary policy and will see a bumper wheat harvest this year, leaving it well placed to tame inflation and meet food security needs, Premier Li Keqiang has said. China’s economic situation contrasts with the United States, which reported inflation at a 40-year high of 8.6 per cent last month, while forecasts of a recession are growing after the Federal Reserve hiked rates by their biggest margin since 1994. Li’s comments on Tuesday underline the rationale behind Beijing’s refusal for large-scale monetary loosening, despite an economic slowdown owing to its zero-Covid strategy . “We have been implementing prudent monetary policy and not printing excessive money in recent years,” the country’s No 2 leader said during a visit to Gaobeidian and Zhuozhou, two cities in Hebei province near Beijing. Why is China’s inflation rate low compared to the US, Europe and Britain? “An important reason for this is to prevent inflation and create room to counter challenges in the future,” he said, according to the official Xinhua News Agency. China has long attributed the rise of global inflation to excessive money printing in Western countries to offset the pandemic, noting the US Federal Reserve’s balance sheet has roughly doubled since early 2020. Global inflation has been made worse since the start of the Ukraine war in late February, which has driven up prices for wheat, crude oil and fertiliser and led to export restrictions from dozens of countries. The World Bank estimated in May that crude oil and wheat could rise more than 50 per cent this year and warned of the looming food crisis. Despite surging inflation in many parts of the world, China’s consumer price index registered only a small rise to 2.1 per cent last month, well below the government’s full-year control target of “around 3 per cent”. When talking with farmers and traders in the wheat fields on Tuesday, Li said grain and energy prices are two key areas to stabilise this year. “Overall Chinese wheat production is higher than last year and a good harvest is almost guaranteed … China’s ample grain supply is vital to stabilise consumer prices,” he said. “Our wheat harvest also contributed to the stability of the global grain market this year.” Rice and wheat are two staple foods on Chinese tables. Lay-offs in China’s export heartland add to worries over economic slowdown China’s wheat production, which accounts for 17 per cent of global output, rose by 2 per cent from a year earlier to 137 million metric tonnes last year. Still, food security – particularly in grains – is a major concern for China, which imports large volumes of agricultural products and has acknowledged “unprecedented” challenges facing supply this year. In Fujian province on Tuesday, Vice-Premier Hu Chunhua ordered southern provincial governments to take forceful measures to reach grain production targets this year. Grain prices rose by 3.2 per cent from a year earlier in May and increased by 2.2 per cent in the first five months of the year, despite international volatility, according to data from the National Bureau of Statistics. Li also visited thermal power plants during his trip, encouraging them to increase production. We must unleash coal capacity as much as possible … and prevent power rationing or blackouts Li Keqiang “We must unleash coal capacity as much as possible, ensure long-term contract supplies … and prevent power rationing or blackouts,” he said. “Tapping the potential of coal resources can safeguard energy security and also be good for the stability of international prices and supply chains.” China was rocked by a nationwide energy crunch last year, which was caused in part by local government efforts to meet decarbonisation targets by reducing coal capacity. The country is the world’s largest energy buyer and fossil fuel emitter. It imported more than 70 per cent of its crude oil last year, mainly from Saudi Arabia and Russia. Authorities have hiked domestic oil prices 10 times this year.