With increasing in the United States and around the world, there are growing warnings that a wave of inflation could threaten the global economy if it persists.
China’s rising prices could be felt around the world considering its global standing as the world’s biggest manufacturer and exporter.
China, Beijing is moving swiftly to protect its factories and workplaces from rising costs. It has discouraged steelmakers and coal producers from raising prices. It has vowed to investigate price-gouging and hoarding. And it has allowed its currency to rise in value to a level unseen in years.
Annabelle New York, a Manhattan-based importer, and distributor that sells down-filled parkas and other high-end apparel to department stores and other retailers, already raised prices 10% this spring. But the company’s costs for merchandise from China are up 20%, said Bennett Model, the company’s chief executive, and president.
Many economists believe price increases will moderate once companies clear supply bottlenecks caused by factory closings and other measures taken during the coronavirus pandemic.
However, China has clear reasons to fear inflation. Its breakneck economic growth over recent decades has periodically been accompanied by surging prices that provoked anger across the country.
Rising prices contributed to the demonstrations in Tiananmen Square in Beijing in 1989. The authorities have long used informal price controls and subsidies to prevent rising costs from being felt in China’s supermarkets and at the family dinner table.
But for now, Chinese manufacturers, rather than consumers, are feeling the price increases. Wholesale prices in China were almost 7% higher in April than a year earlier, when the pandemic was holding down prices. Costlier iron ore from Australia and corn from the United States account for much of that rise.
China’s cabinet announced subsidies a week ago for small businesses to help them afford spiraling costs for commodities. New limits have been imposed on the trading of commodities for future delivery to discourage speculation. Export taxes have been raised on some kinds of steel to keep more of the metal inside China.
At a cabinet meeting on May 19, Premier Li Keqiang ordered officials to “resolutely crack down on monopoly and hoarding in accordance with laws and regulations, and strengthen market supervision.”
Government measures may slow but not stop wholesale price increases. Companies stuck with rising costs for raw materials eventually find ways to raise prices or else just suspend production.