China inflation: Beijing prioritises price stabilisation as stagflation risk increases
- China’s consumer price index (CPI), a key gauge of inflation, could rise to as much as 2.1 per cent in April from 1.5 per cent in March
- US inflation has jumped to a three-decade high, with the World Bank warning of ‘the largest commodity shock we’ve experienced since the 1970s’
Rising imported inflation concerns have jumped higher on China’s agenda as the world’s biggest buyer of commodities is feeling the impact of the increasing price of crude oil, grains and many raw materials amid the prolonged Russia-Ukraine war.
A weakening yuan and the potential for a rise in the price of pork, a key meat on Chinese tables, have also forced policymakers to prioritise price stabilisation as they seek to avoid the risk of stagflation when economic growth stagnates but inflation rises.
But others feel the government’s target of “around 3 per cent” for the year could even be challenged as early as September.
China still faces the risk of a rebound of structural inflation pressure. The recent yuan depreciation could also fuel imported inflation
“China still faces the risk of a rebound of structural inflation pressure,” said Pingan Securities’ chief economist Zhong Zhengsheng on Friday.
“The recent yuan depreciation could also fuel imported inflation.”
China will release its CPI for April on Wednesday, with the expectations of analysts in a Bloomberg survey predicting 1.9 per cent growth.
The benchmark Brent crude has jumped by 60.8 per cent from a year ago to US$110 per barrel on Thursday, and is expected to rise further as the United States and the European Union are considering an oil embargo on Russia, which provided China with over 15 per cent of its total supply in 2020.