Inflation due to US transferring cost of its recovery to others

Some countries allege that China is exporting inflation. This is a baseless charge that does no good to any party. The swift rise of staple commodity prices originates from the decline of supply and the excess liquidity that are related to the COVID-19 pandemic and the infinite quantitative easing of the United States.

The main contradiction in the relationship between supply and demand is still the mismatch between the supply and demand because of the pandemic. Thanks to pandemic prevention and control measures and vaccination programs, the situation in some advanced economies has eased and household consumption has rebounded rapidly.

The strengthening of economic recovery expectations has fueled the rising prices of commodities on the demand side. At the same time, the pandemic has severely impacted some raw material-producing countries and caused major disruptions to the global supply chains. The extraction of fossil fuels, exports of raw materials and industrial production capacity are all unable to meet the needs of the international market, increasing the sensitivity of commodity prices to changes in demand on the supply side.

At the same time, developed economies have adopted large-scale loose monetary policies and fiscal stimulus policies. This has led to a serious surplus of global liquidity, which has distorted the traditional resource allocation and investment valuation, and directly pushed up the prices of commodities priced in US dollars. This is the most important driving force behind the global inflation risk.

China, on the other hand, has kept its financial and monetary policies prudent and restrained even though it also needs to boost its economic recovery.

There are several reasons for the anxiety reflected in the claim that China is exporting inflation. First, China's economy has been the first to recover from the impacts of the novel coronavirus outbreak, and it has undertaken a greater share of the global supply chain and commodity exports. So global attention on it is higher. Second, due to the pandemic, the consumption of consumer sectors in various countries has replaced the consumption of goods with a large proportion of service consumption, so there are concerns about inflation transmission. Third, due to significant differences in the world's major economies, especially major exporting and importing countries, restarting their economies, there is a significant mismatch between supply and demand. As a result, some countries have begun to shirk their responsibilities by looking for external factors.

Apart from doing their respective homework to minimize the impact of inflation on their economies, countries need to take coordinated actions to prevent and control the risks caused by the US' limitless quantitative easing policies, the essence of which is to transfer the costs of US economic recovery to the rest of the world.