Higher commodity prices have had a limited impact on prices

At present, there is no overall and trend change at both ends of supply and demand of bulk commodities, and their prices do not have a long-term basis for rising. Still, higher commodity prices will squeeze midstream and downstream corporate profits. We should actively expand effective demand, strengthen market regulation such as raw materials, and adopt targeted structural policies to relieve pressure on enterprises.

The Financial Stability and Development Committee of the State Council held its 50th meeting recently and stressed the need to keep prices basically stable, with particular attention to the trend of commodity prices. Premier Li Keqiang recently presided over a symposium of experts and entrepreneurs on the economic situation, also expressed concern over the sharp rise in international commodity prices.

Since the second half of last year, commodity prices such as food, energy and non-ferrous metals have continued to rise, and global inflation expectations have increased, along with rising demand driven by the expected strong global economic recovery, the continuous promotion of the new coronavirus vaccine and the implementation of quantitative easing policies in developed economies. Global food prices rose for the 10th consecutive month in March, reaching their highest level since June 2014, according to a report released by the United Nations Food and Agriculture Organization. Copper, steel, tin and other commodity prices have recently set new highs.

At present, China's economy has been deeply integrated into the global economy, and price trends are bound to be affected by external factors objectively. The abundant global liquidity and rising international commodity prices may be transmitted to China through trade, finance and other channels. This transmission is already happening. The China Commodity Index (CBMI) reached 102.1% in March 2021, up 0.4 percentage points from the previous month and the highest since December 2020.

In terms of the producer price index, the month-on-month growth rate of PPI has been rising for 10 consecutive months, and the year-on-year growth rate has accelerated since it became positive in January this year. Oil and gas extraction, oil, coal and other fuel processing, chemical raw materials and chemical products manufacturing, ferrous metal smelting and rolling processing, and non-ferrous metal smelting and rolling processing prices together contributed 1.27 percentage points to PPI growth, accounting for 80% of the total increase.

In the coming period of time, international bulk commodity prices still have room to rise. At present, there is no overall and trend change at both ends of the supply and demand of bulk commodities, and its price does not have the basis for long-term rise. The conduction impact on the domestic market is generally limited and controllable.

Generally speaking, the transmission of bulk commodity prices to terminal consumer prices is indirect. China has a huge industrial system, a long industrial chain and fierce competition in the industrial consumer goods market. The transmission effect of the upstream cost to the downstream will gradually decrease. The PPI/CPI scissors spread widened to 4 percentage points in March, reflecting both the base disturbance and the limited transmission of price increases from PPI to CPI. At the same time, it also reflects that China's economy is still in the process of recovery growth, and demand is still relatively weak. In terms of CPI composition, food and services account for a high proportion of China's CPI and are less affected by international factors. China has a high grain output, stable supply and sufficient reserves. China has a relatively strong supply capacity for industrial consumer goods, and the quantity and quality of supply in the service sector are constantly improving.

Price increases are fundamentally determined by relative changes in aggregate supply and aggregate demand. At the macro level, China's economic recovery is picking up speed, supply and demand are becoming more balanced, and positive factors continue to increase. We have sufficient macro-policy space, and a solid foundation for stable price movements. Looking ahead to the annual price trend, CPI will rise moderately, showing a trend of "low at the beginning and stable at the end". The annual inflation target of around 3% will be met. PPI is expected to reach the year's high in the second quarter, showing a trend of "low at both ends and high in the middle", and the annual average will be at a reasonable level.

Although prices for this year are expected to remain stable on the whole, the international environment remains complex, and the domestic economy faces such problems as high employment pressure and slow recovery of some industries. We should be on guard against excessively rapid PPI growth. A large number of private small and micro enterprises are gathered in the middle and lower reaches of China's manufacturing industry. Increasing costs and insufficient demand are prominent difficulties faced by many enterprises at present. Rising commodity prices will squeeze the profits of middle and lower reaches of enterprises, and the resulting operational risks will also rise. While continuing to coordinate epidemic prevention and control and economic and social development, we need to actively expand effective demand, strengthen market regulation such as raw materials, and adopt targeted structural policies to relieve pressure on enterprises.

At present, there is no overall and trend change at both ends of supply and demand of bulk commodities, and their prices do not have a long-term basis for rising. Still, higher commodity prices will squeeze midstream and downstream corporate profits. We should actively expand effective demand, strengthen market regulation such as raw materials, and adopt targeted structural policies to relieve pressure on enterprises.

The Financial Stability and Development Committee of the State Council held its 50th meeting recently and stressed the need to keep prices basically stable, with particular attention to the trend of commodity prices. Premier Li Keqiang recently presided over a symposium of experts and entrepreneurs on the economic situation, also expressed concern over the sharp rise in international commodity prices.

Since the second half of last year, commodity prices such as food, energy and non-ferrous metals have continued to rise, and global inflation expectations have increased, along with rising demand driven by the expected strong global economic recovery, the continuous promotion of the new coronavirus vaccine and the implementation of quantitative easing policies in developed economies. Global food prices rose for the 10th consecutive month in March, reaching their highest level since June 2014, according to a report released by the United Nations Food and Agriculture Organization. Copper, steel, tin and other commodity prices have recently set new highs.

At present, China's economy has been deeply integrated into the global economy, and price trends are bound to be affected by external factors objectively. The abundant global liquidity and rising international commodity prices may be transmitted to China through trade, finance and other channels. This transmission is already happening. The China Commodity Index (CBMI) reached 102.1% in March 2021, up 0.4 percentage points from the previous month and the highest since December 2020.

In terms of the producer price index, the month-on-month growth rate of PPI has been rising for 10 consecutive months, and the year-on-year growth rate has accelerated since it became positive in January this year. Oil and gas extraction, oil, coal and other fuel processing, chemical raw materials and chemical products manufacturing, ferrous metal smelting and rolling processing, and non-ferrous metal smelting and rolling processing prices together contributed 1.27 percentage points to PPI growth, accounting for 80% of the total increase.

In the coming period of time, international bulk commodity prices still have room to rise. At present, there is no overall and trend change at both ends of the supply and demand of bulk commodities, and its price does not have the basis for long-term rise. The conduction impact on the domestic market is generally limited and controllable.

Generally speaking, the transmission of bulk commodity prices to terminal consumer prices is indirect. China has a huge industrial system, a long industrial chain and fierce competition in the industrial consumer goods market. The transmission effect of the upstream cost to the downstream will gradually decrease. The PPI/CPI scissors spread widened to 4 percentage points in March, reflecting both the base disturbance and the limited transmission of price increases from PPI to CPI. At the same time, it also reflects that China's economy is still in the process of recovery growth, and demand is still relatively weak. In terms of CPI composition, food and services account for a high proportion of China's CPI and are less affected by international factors. China has a high grain output, stable supply and sufficient reserves. China has a relatively strong supply capacity for industrial consumer goods, and the quantity and quality of supply in the service sector are constantly improving.

Price increases are fundamentally determined by relative changes in aggregate supply and aggregate demand. At the macro level, China's economic recovery is picking up speed, supply and demand are becoming more balanced, and positive factors continue to increase. We have sufficient macro-policy space, and a solid foundation for stable price movements. Looking ahead to the annual price trend, CPI will rise moderately, showing a trend of "low at the beginning and stable at the end". The annual inflation target of around 3% will be met. PPI is expected to reach the year's high in the second quarter, showing a trend of "low at both ends and high in the middle", and the annual average will be at a reasonable level.

Although prices for this year are expected to remain stable on the whole, the international environment remains complex, and the domestic economy faces such problems as high employment pressure and slow recovery of some industries. We should be on guard against excessively rapid PPI growth. A large number of private small and micro enterprises are gathered in the middle and lower reaches of China's manufacturing industry. Increasing costs and insufficient demand are prominent difficulties faced by many enterprises at present. Rising commodity prices will squeeze the profits of middle and lower reaches of enterprises, and the resulting operational risks will also rise. While continuing to coordinate epidemic prevention and control and economic and social development, we need to actively expand effective demand, strengthen market regulation such as raw materials, and adopt targeted structural policies to relieve pressure on enterprises.