China is not waiting to discover.
Beijing is moving fast to protect its factories and workplaces from rising costs. This discouraged steelmakers and coal producers from raising prices. It vowed to investigate price spikes and hoarding. In addition, the value of currencies has risen to levels not seen in recent years, making them a more valuable and powerful tool for purchasing the world’s grains, meat, oil, minerals and other necessities.
Price increases in China, the world’s largest manufacturer and exporter, can be felt around the world. Chinese stats announced Wednesday morning that prices charged by factories, farmers and other producers rose 9% in May compared to the previous year when the pandemic kept costs down.
Manhattan-based Annabel New York, an importer selling downed hoodies and other luxury apparel to department stores and other retailers, has already raised prices by 10% this spring. However, the cost of the company’s Chinese products has risen by 20%, said Bennett Model, the company’s CEO and president.
As global oil prices rise, the chemicals used to make Parker’s synthetic shells are becoming more expensive. Downfeather, China’s largest producer in the world, is becoming more expensive. In addition, air freight and shipping companies struggled to keep up with demand, which tripled the cost of cross-Pacific shipping for some shipments.
Only the fear of losing customers prevented Mr. Model from passing on all these high costs to American stores. Instead, he accepted a narrower rate of return.
“If I really want to cover all the price increases, the current price will be exorbitantly expensive,” he said.
It is uncertain whether current global inflation will continue.Many economists believe in rising prices Moderate Once the company has eliminated supply bottlenecks caused by factory closures and other measures taken during the coronavirus pandemic.
But China has clear reasons for fear of inflation. Its tremendous economic growth over the last few decades Regularly Was done Accompany Soaring prices have caused anger all over the country.Price increase Cooperated with the demonstration Authorities have long used informal price controls and subsidies to keep costs from rising at Chinese supermarkets and family dinner tables.
For some products, prices are actually rising. Paper manufacturer Mass sales prices for napkins and toilet paper have quadrupled this spring. The price of soybeans for tofu is rising.
But so far, Chinese manufacturers are feeling higher prices than consumers. Expensive Australian iron ore and US corn make up the majority of the rise.
Chinese Cabinet Subsidies announced a week ago This is so that SMEs can bear the soaring costs of their products. To prevent speculation, new restrictions have been placed on the trading of goods for future deliveries. Export taxes on several types of steel have been raised to keep more metals in China.
At the Ministerial Meeting on May 19, Prime Minister Li Keqiang Ordered official “In accordance with legislation, we will firmly crack down on monopolies and hoarding and strengthen market supervision.”
Government measures may delay the rise in wholesale prices, but they cannot be stopped. Companies suffering from soaring raw materials will eventually find ways to raise prices or stop production. Papermakers, caught up in soaring raw pulp prices and various pressures not to raise paper prices, closed several factories this spring for maintenance.
So far, price increases don’t seem to permeate Chinese consumers. China’s consumer price index rose only 1.3% year-on-year in May.
One of the reasons is that China’s domestic economy has not yet fully recovered from the pandemic. The sluggish consumer spending means that fewer households are raising prices for pork chops, which have been a little cheaper these days, and men’s underwear, whose prices haven’t changed.
Shanghai covered market vendors said last afternoon that there were no signs of rising food prices yet. For example, egg and beef prices have changed little.
“The cost of living hasn’t changed much. The prices of green vegetables are always the same,” said Yang Yuxia, who has been selling chicken, pigeon and other bird eggs on the streets since 1998.
However, merchants dealing with non-staple foods have already carefully watched the price increases by their suppliers.
“Of course, I’m worried about the price going up. If the price goes up, the number of customers will decrease,” said Gao Hong, who sells freshwater eels and shrimp in a store across the market.
Chinese consumers are also protected by the surplus of factories that manufacture essentials such as clothing and home appliances. Excessive capacity allows shoppers to choose from many competitors. This makes it difficult for manufacturers to pass on price increases to buyers.
“In the entire supply chain, people with less bargaining power will bear the cost,” said Wang Dan, chief economist at Hang Seng Bank of China. In China, companies in the early stages of the supply chain tend to be less bargaining than retailers and consumers.
However, rising prices in China may spread overseas. National leaders are trying to address the threat of inflation by increasing the value of currencies.
The yuan has approached its strongest point against the US dollar since mid-2018. About a year ago, one dollar cost more than RMB 7.1, but now we are buying about RMB 6.4.
The yuan has risen 2.2% against the dollar since the beginning of this year, and each value is only a small part of a penny. But China is spending huge amounts of dollar-denominated resources, for example, spending $ 176.2 billion on crude oil imports alone last year and another $ 50.8 billion on grain imports. Those penny quickly piled up. I will.
The Chinese currency has long been an important political issue. US lawmakers and officials have long accused China of unfairly keeping its currency weak and giving its exporters a competitive advantage in foreign markets.
But in this case, the Chinese authorities are just sitting down and forcing global forces to strengthen their currencies. The dollar has begun to fall against many currencies, including the euro, as well as the yuan, as the United States has borrowed and spent so much in recent months to counter the economic impact of the pandemic.
“The rise in the yuan is due to the good performance of the Chinese economy,” said Gary Liu, an independent economist in Shanghai. “The United States is currently creating an excess of money supply, and as a result, the dollar is softening.”
However, stronger currencies have their downsides, and Chinese authorities appear to be intervening to stop further gains. As currencies become stronger, Chinese products become less attractive in other markets. So far, the world seems happy to keep buying products made in China anyway. Nevertheless, the People’s Bank of China warned currency traders on May 27 not to consider further gains to be a one-sided bet.
Meanwhile, the rise in the yuan could push up the price of Chinese goods in the US and increase price pressure in the US, but in most cases it is a modest way.
US Bureau of Labor Statistics Index Average price of imports from China Prices have fallen by about 2% from the summer of 2018 until the start of the pandemic, after which they have leveled off. Currently, these prices are up 2% from November.
“Is China Exporting Inflation?” Said Lewis Quiz, a Chinese expert at Oxford Economics. “In the yuan, it’s not so obvious, but in the US dollar, it’s starting to get bigger.”
Rin Chitin And Ryu Yi Contributed to the research.
China moves to curb inflation before prices rise excessively
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