Positive conditions help stabilize prices

China has the conditions to keep prices stable for the rest of the year despite elevated global inflation, with consumer inflation likely remaining below the nearly 3 percent target for 2022, officials and experts said.

Experts expect that China's consumer inflation will rise modestly and factory-gate inflation should trend down for the rest of the year, leaving room for further monetary easing in the coming months.

Fu Linghui, a spokesman for the National Bureau of Statistics (NBS), said at a recent news conference in Beijing that despite facing rising inflationary pressure, China still enjoys many favorable conditions to keep overall prices stable for the rest of the year.

Fu said China has sufficient supply of agricultural and industrial products, and there is insufficient room for significant pork price gains considering factors such as China's ample supply of hogs.

When it comes to imported inflationary pressure, Fu said the impact of import factors will likely ease given monetary tightening among major economies and slower growth in international commodity prices. China's efforts to stabilize prices and supplies and the rapid growth in the production of major energy products will also help stabilize prices.

Looking ahead, Fu said while consumer inflation may rise notably in some months in the second half, China has conditions in place to keep consumer prices stable for the full year.

Fu's remarks came as China's consumer inflation accelerated to the highest level in two years, largely driven by surging pork prices, but it still managed to come in weaker than expected in July.

China's consumer price index, a main gauge of inflation, rose 2.7 percent year-on-year in July, following a 2.5 percent rise in the previous month, said the NBS.

China's producer price index, which gauges factory-gate prices, increased 4.2 percent year-on-year in July after a 6.1 percent rise in June, cooling to the lowest level since February 2021.

Feng Mohan, a macroeconomics researcher at Beijing FOST Economic Consulting Co Ltd, said the rise in July CPI was mainly driven by food price gains, which was largely due to rising pork prices.

Despite facing structural inflationary pressure amid elevated global inflation, Feng said the CPI will likely rise mildly in the following month as there is limited room for further food price gains, and growth in industrial products prices may slow amid fears over a gloomy global economic outlook.

People's Bank of China, the nation's central bank, said in a new report that it will strike a balance between economic growth and price stability.

The PBOC said China may face mounting inflationary pressure at home due to factors including a recovery in consumer demand, rising pork prices and high energy and raw material costs, and imported inflationary pressure will continue to exist.

According to the report, China will continue to keep a prudent monetary policy and refrain from adopting a deluge of strong stimulus policies, as well as keep an eye on the inflation situation both at home and abroad.

Compared with soaring prices in other major economies, China's overall price levels are generally stable. The CPI growth in the United States remained elevated at 8.5 percent year-on-year in July, albeit down from 9.1 percent in June, thanks to falling energy prices, according to the US Department of Labor.

As China's price inflation hit a relatively lower level in the first half, Ye Yindan, a researcher with the Bank of China Research Institute, estimated that this year, China's full-year CPI and PPI may rise 2.4 percent and 5 percent, respectively.

Ye warned of pressure from soaring pork prices and imported inflationary pressure from rising global energy and food prices, saying China's CPI may rise at a faster pace than the level in the first half, and the CPI may grow above 3 percent in some months.

However, China's PPI will continue to grow at a slower pace in the third and fourth quarters amid the continued US Federal Reserve's rate hikes, a sluggish global economy, weakening demand and limited room for further commodity price gains.

Against this backdrop, Ye said China still has room for further monetary easing to support recovery of the real economy.