BIG IDEA | ‘Beijing is moving swiftly to protect its factories and workplaces from rising costs.’

‘Still, rising prices in China, by far the world’s biggest manufacturer and exporter, could be felt around the world.’

‘Prices are jumping in the United States and around the world, prompting growing warnings that a wave of inflation could threaten the global economy if it persists.’

• ‘In China, its statistical agency announced on Wednesday morning that prices charged by factories, farmers and other producers had soared 9 percent in May compared to a year earlier, when the pandemic was holding down their costs.’
• ‘It was the biggest increase since September 2008.’

‘Beijing is moving swiftly to protect its factories and workplaces from rising costs.’

• ‘It has discouraged steel makers 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, giving it a more valuable and powerful tool for buying up the world’s grain, meat, petroleum, minerals and other essentials.’

‘But for now, Chinese manufacturers, rather than consumers, are feeling the price increases.’

• ‘Costlier iron ore from Australia and corn from the United States account for much of the rise.’

‘So far, price increases don’t appear to be trickling down to China’s consumers.’

• ‘China’s consumer price index was only 1.3 percent higher in May than a year earlier.’

‘One reason is that the Chinese domestic economy has not yet fully recovered from the pandemic.’

• ‘Lackluster consumer spending means fewer households are bidding up the prices of goods like pork chops, which have become a little cheaper lately, and even men’s underwear, for which prices have not changed.’

‘China’s consumers are also protected by the country’s surplus of factories that make essentials like clothing and household appliances.’

• ‘The overcapacity ensures that shoppers have plenty of competitors to choose among.’
• ‘That makes it hard for manufacturers to pass along price increases to buyers.’
• ‘ “Along the supply chain, whoever has less negotiating power will bear more cost,” said Wang Dan, the chief economist at Hang Seng Bank China. In China, the companies at earlier stages of supply chains tend to have less bargaining power than retailers and consumers.’