Ensuring stable supply and price escorts steady economic development

2022-06-07 0 By

In 2021, under the influence of extremely loose policies, disrupted industrial and supply chains, and tight energy supply, international commodity prices rose sharply, and the global low-inflation environment changed significantly. Some economies have shown “inflation” to varying degrees.In the face of imported inflationary pressure and the impact of the COVID-19 pandemic, relevant government departments continued to strengthen price monitoring and early warning, and adopted multiple measures to ensure supply and price stability of major commodities. In 2021, China’s overall prices stayed within a reasonable range, smoothly achieving the target, and effectively ensuring steady and sustained economic growth.In 2021, China’s consumer price index (CPI), which was initially low but then stable, rose modestly throughout the year.In 2021, CPI fell in January and February year on year;In March, it changed from decline to rise, and then fluctuated upward.It hit a year high of 2.3% in November;It fell to 1.5% in December;In 2021, the growth rate will average 0.9 percent, 1.6 percentage points lower than that of the previous year, smoothly meeting the target.The sharp fall in pork prices and relatively stable service prices are the main reasons for the low CPI.With the resumption of pig production capacity, pork prices fell sharply, driving down CPI inflation by about 0.7 percentage points on average in 2021.Domestic consumption has yet to fully recover due to the spread of the epidemic, and service prices remain stable, rising by 0.9% on average in 2021, lower than in previous years.The producer price index (PPI), which had risen sharply, fell, turning the year from decline to increase.In 2021, due to the global economic recovery, excessive liquidity, supply bottlenecks, extreme weather and other cyclical, structural and stage factors, the prices of major commodities in the world rose significantly, with some hitting record highs. The average prices of crude oil, coal, iron ore, steel, copper and aluminum rose by 35% to 80% in the whole year.As a result, PPI rose rapidly from 0.3% in January 2021 to 13.5% in October 2021. With the effect of national policies and measures to ensure supply and stabilize prices, PPI fell to 12.9% and 10.3% in November and December 2021 respectively, with an average annual increase of 8.1% from a decline of 1.8% in the previous year.In 2021, international commodity prices rose significantly, increasing the cost pressure on downstream micro, small and medium-sized enterprises and affecting the stability of industrial chains and supply chains, which once became a prominent contradiction in economic operations.In response, relevant state departments thoroughly implemented the decisions and plans of the CPC Central Committee and The State Council, promptly adopted a series of policies and measures to ensure supply and stabilize prices, promoted reasonable price return, alleviated downstream cost pressure, firmly held the bottom line of people’s livelihood, and ensured stable economic operation.In 2021, China’s GDP grew 8.1 percent from the previous year and CPI rose 0.9 percent, achieving an optimal combination of higher growth and lower inflation.– We should combine efficient market with efficient government.On the one hand, we will support large enterprises in setting up supply and demand platforms for key industry chains, and use market-based methods to guide the supply of raw materials up and down the supply chain to stabilize and coordinate production and marketing.We will deepen the market-based reform of on-grid pricing for coal-fired power generation, expand the range of market price fluctuations, and establish a market-based pricing mechanism that allows prices to rise and fall to ensure a stable supply of electricity.On the other hand, the joint supervision of the spot market has been strengthened, and illegal activities such as hoarding, price gouging and malicious speculation have been severely punished in accordance with the law. Key enterprises and associations in coal, iron ore, steel, copper, aluminum and chemical fertilizer industries have been interviewed for many times.We issued the Measures for The Conduct of Price Indices for Major Commodities and Services, and carried out assessments and compliance reviews on some coal price indices to create a fair and orderly market environment.State reserves of crude oil, copper, aluminum, zinc and potash fertilizer will be targeted to cool down the overheated market in a timely manner.A one-time subsidy of 20 billion yuan was granted to grain farmers to address the impact of rising prices for agricultural supplies.We will provide tax suspension and financial support to coal power and heating enterprises to ease their current difficulties.– Improving mechanisms and innovating methods.On the one hand, we strengthened top-level design and improved the regulation mechanism. We issued the Opinions on Improving the Price Regulation Mechanism for Important Commodities that people’s livelihood needs.We issued the Plan on Improving the Government’s Mechanism for Regulating Pork Reserves and Ensuring supply and price Stability in the Pork market, and organized timely trading of pork reserves according to the market situation.We will further improve the mechanism for raising social assistance and social security benefits when prices rise, expand the coverage of social security benefits as appropriate, include orphans, children who have no one to support them, and children infected with HIV, and shorten the time for receiving such benefits.On the other hand, we have innovated ways of thinking, enriched means of regulation, implemented two-way regulation of supply and demand, carried out regular supervision and consultation, strengthened joint supervision of the spot market, optimized market expectation management, and established a basic framework for commodity price regulation.In particular, since late May 2021, the iron ore market supervision and research will be strengthened, and strong regulatory signals will continue to be released, driving iron ore prices to fall sharply.In the middle and late October of 2021, intensive release of heavy information to actively stabilize market expectations and lead the coal price to fall by about 50% within about 10 days.– Adhering to the combination of systems and bottom-line thinking.On the one hand, strengthen overall coordination, give play to the role of coal oil and gas transport guarantee mechanism, coordinated from ChanGong store and pin the whole chain each link, adjust the impact energy for steady production and price is not reasonable measures, to promote coal safety production ZengGong, push on the basis of oil and gas production, improving the capacity of peak shaving is protected for, meet the gas supply of coal used in fertilizer production, expanding the scope of the fertilizer railway preferential freight rate,We will resolutely curb the blind development of such projects.On the other hand, we need to be more aware of risks, ensure people’s wellbeing and maintain overall economic and social stability.In response to the problem that the prices of some vegetables had once risen considerably, we tightened the system whereby mayors take responsibility for the vegetable basket, focused on the production and supply of vegetables, and brought down prices significantly.In response to the shortage of coal supply and the sharp rise in the price of coal, we sent out a clear signal of strong regulatory policies, made every effort to eliminate the potential shortfall in energy use, worked out contingency plans for severe weather in advance, and resolutely restrained unreasonable price increases.In 2021, extreme easing policies in major economies, disrupted industrial and supply chains, and strained energy supply are intertwined, driving global inflation significantly upward, with inflation in many economies rising to multi-year highs or hitting record highs.The CPI in the US rose by 4.7% on average in 2021, reaching 7% in December, the highest in nearly 40 years.The PPI has averaged 6.9 per cent for the year, up from 9.7 per cent in December.In the eurozone, CPI rose 5% in December 2021 and PPI rose 23.7% in November 2021, both hitting record highs.In Russia, India, Brazil and other emerging economies, inflation levels are also at multi-year highs. In Turkey, CPI and PPI rose 36% and 80% respectively in December 2021.In the face of rising global inflation pressure, China has acted responsibly as a global price stabilizer. While stabilizing domestic prices, China has contributed to balancing supply and demand in the international market and stabilizing global prices, fully demonstrating its sense of responsibility as a major country.On the one hand, China has achieved remarkable results in coordinating epidemic prevention and control with economic and social development, leading the world in regular epidemic prevention and control, maintaining a stable production order and a resilient economy, effectively maintaining the smooth operation of the global industrial and supply chains, and providing countries with quality and inexpensive goods.On the other hand, China adhered to a prudent monetary policy, appropriately controlled the intensity, pace and priorities of its policies, and resolutely refrained from indiscriminate strong stimulus, thus keeping prices within an appropriate range.In particular, in response to the marked rise in commodity prices, relevant government departments acted decisively and promptly adopted measures to adjust supply and demand in both directions, strengthen market oversight, and manage expectations. They carried out a combination of policies to ensure supply and stabilize prices, resolutely contained unreasonable price increases, and contributed positively to stabilizing global prices.As the policy of ensuring supply and stabilizing prices has taken effect, the prices of coal, iron ore and steel in China have fallen significantly, driving down international prices to varying degrees.In 2022 with a solid foundation for prices to keep running smoothly in our country, the upstream and downstream prices more harmonious outlook 2022, from the international view, global inflation may also will maintain a period of time, but as the major economies monetary policy shift, supply and demand gap tends to narrow, international commodity prices continue to rise sharply kinetic energy shortage, inflation pressure is expected to be marginal.Domestically, China’s economy has continued to recover. There is ample supply of industrial and agricultural products and services; there is sufficient supply of grain, oilseed, meat, eggs, milk, fruits and vegetables and other important commodities for people’s livelihood; there is strong guarantee of basic energy sources such as coal, oil and gas; and China’s ability to effectively respond to abnormal fluctuations in market prices has significantly increased.Based on a comprehensive analysis, there is a solid foundation for China to maintain stable price movements in 2022. CPI is expected to continue the trend of moderate increase, PPI inflation may gradually decline, and upstream and downstream prices are more coordinated.(Author: Institute of Market and Price, China Academy of Macroeconomic Research)