China's success in managing to keep inflation in check contributes to the global drive in curbing price hikes

Soaring inflation worldwide in the first half of this year has become an acute challenge to economic growth. Among the world's major economies, China is one of the few countries that have kept consumer prices at a relatively low level. In addition, the nation has made a positive contribution to curbing global inflation by reducing its imports of energy products as the global energy shortage has fueled a surge in prices.

In the United States, the consumer price index soared 9.1 percent in June from a year ago, marking the fastest pace of inflation growth in 40 years. The US producer price index in June increased by 11.3 percent year-on-year, and the upward trend has strengthened compared with the previous months. Statistics indicated by the Eurostat suggest the harmonized index of consumer prices, a gauge of consumer price inflation, rose by 8.6 percent year-on-year in the eurozone in June, and the upward momentum is being consolidated. According to data from the Organization for Economic Cooperation and Development, the average inflation rate in the OECD countries reached 9.6 percent in May, up 3 percentage points from December 2021. The figure, which is just one step away from double-digit inflation, showed a high level of inflation among the developed economies. Many developing countries are also facing severe inflation, with some countries such as Turkey, Argentina and Brazil seeing double-digit inflation rates.

Against this backdrop, China's CPI rose by 1.7 percent year-on-year in the first half. Although the rise in the inflation rate gathered steam in June, when the CPI was up by 2.5 percent on a yearly basis, the rate remained at a low level compared with that of the developed economies such as the US and the European Union. As the world's second-largest economy and the most populous country, China has succeeded in keeping its inflation at a low level which can help the world rein in inflation surge.

The spike in prices of energy and food is the main factor driving up consumer prices in this round of global inflation. For example, in the US, consumer prices rose by 9.1 percent year-on-year in June, with energy prices up by 41.6 percent from a year ago. The rise in energy prices drove consumer prices up by 3.6 percentage points, contributing nearly 40 percent to the overall rise in consumer prices. Food prices rose by 10.4 percent year-on-year, which drove consumer prices up by 1.4 percentage points and contributed more than 15 percent to the overall increase in consumer prices. The two factors combined drove consumer prices up by 5 percentage points and contributed 55 percent to the overall increase in consumer prices. The fundamental reason for the sharp rise of energy and food prices lies in the excess liquidity policies adopted by the US and the EU since the onset of the COVID-19 pandemic. It is also related to the rise in energy prices caused by the sanctions imposed on Russia by the US and other Western countries after the conflict between Russia and Ukraine broke out earlier this year.

Meanwhile, in the first half of this year, China produced 2.19 billion metric tons of raw coal, up 11.0 percent year-on-year, and its coal imports totaled 115 million tons, down 17.5 percent. It produced 102.88 million tons of crude oil, up 4.0 percent year-on-year while its imports of crude oil decreased by 3.1 percent year-on-year to reach 252.52 million tons. China produced 109.6 billion cubic meters of natural gas, up 4.9 percent year-on-year, and imported 53.57 million tons, down 10 percent. The above data suggest that China has strengthened its support for consumer spending by increasing domestic energy production, while its imports of fossil energy have declined to varying degrees. The significant decline in the energy imports of China, a major energy importer, has played a significantly positive role in reducing the imbalance between supply and demand in the global energy market and helped alleviate the pressure from rising market prices.

While increasing energy production, China has also prioritized steps to accelerate its energy transformation and structural adjustment. From the perspective of energy demand, China is curbing the growth of energy demand by reducing the output of high energy consuming industries. In the first half of the year, China's cement output fell 15 percent year-on-year, crude steel output fell 6.5 percent, pig iron output fell 4.7 percent and rolled steel output fell 4.6 percent. From the perspective of its energy supply, China has increased the scale of renewable energy power generation and its proportion in the country's total power generation. Its electricity generation rose 0.7 percent in the first half of this year, with thermal power generation down 3.9 percent, hydropower up 20.3 percent, wind power up 7.8 percent and photovoltaic power up 13.5 percent. The three renewable energy sources accounted for 26.2 percent of the country's electricity generation in the first half of this year, 3.3 percentage points higher than the first half of 2021. This can be attributed to the efforts made by China to develop its renewable energy sector in recent years. According to data released by the National Energy Administration, China's newly installed renewable energy power generation capacity reached 43.49 million kilowatts from January to May, accounting for 82.1 percent of its total newly installed power generation capacity. As of May, China's total installed capacity of renewable energy power generation has reached 1.1 billion kilowatts.

By accelerating its energy transformation and expanding domestic production, China has significantly reduced energy imports from the international market in the first half of this year. Against the background of high global inflation, this move is conducive to easing the upward pressure on commodities in the international market and curbing global inflation.

The author is the deputy chief economist with the China Center for International Economic Exchanges. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.