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The top priority for China's monetary policy is to maintain price stability, said Yi Gang, governor of the People's Bank of China, while addressing the Boao Forum for Asia 2022 Annual Conference last week. Although China's consumer price index rose 1.5 percent in March, it remains low. However, the purchase price index has remained high since late last year, and the sharp rise in energy prices and other commodity prices this year has further aggravated inflation pressure, especially in industrial goods. Food production and energy supplies are important for price stability this year, and prices can be kept stable within a reasonable range as long as food production and energy supplies are ensured. The Ukraine conflict's influence on global oil and food supplies are evident, while the United States is pushing for a stronger dollar to fight inflation－a rising dollar index means depreciating currencies in more developing countries and higher inflation in many countries. As a result, global inflation risks getting out of control due to multiple factors. Which is one reason why China has made keeping price stability the primary goal of its monetary policy. China has ample grain reserves, a coal-based energy mix that can help offset upward pressure on energy prices, and a relatively strong currency that imports less inflation through commodity imports. But the renminbi's recent depreciation against the U.S. dollar could have an impact on prices. So China still needs to stabilize prices to avoid it from sapping growth momentum through depressing consumption, widening income disparities and exacerbating employment problems. People have begun to save more and spend less, unavoidably affecting consumption and supplies at the same time. If there is inflation, it will further dampen consumption and hurt employment, widen the income gap and make the low and middle-income groups more vulnerable to the economic difficulties. Thus it is imperative to maintain price stability, avoid the uncertainty caused by inflation and pessimistic expectations affecting consumer confidence, and the risk of stagflation that will make the economy face a more complicated situation. Maintaining employment and price stability must be given greater priority, and external risks must be addressed with increasing urgency. |
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