Analysis of Rising Commodity Price and Its Impact--CCIEE Holds the 141st “Monthly Economic Talk”

On May 20, China Center for International Economic Exchanges (CCIEE) held the 140th "Monthly Economic Talk" online under the theme of “The Rising Commodity Price and Its Impact". The meeting was chaired by Zhang Dawei, Vice Chairman and Secretary-General of CCIEE. Zhang Yongjun, Deputy Chief Economist of CCIEE, Chen Zhongtao, Chief Economist of China Logistics Information Center, and Xu Gao, Chief Economist of BOC International Securities, delivered speeches respectively.

Zhang Yongjun pointed out that, recently prices of various commodities have risen sharply to varying degrees, mainly as a result of the economic recovery and stimulus policies implemented in the United States and the euro zone. The impact of increased international commodity prices will gradually spill over domestic prices, and consumer prices will be less affected and the price of production materials will be more affected. After the pandemic in China has been effectively controlled, the consumer price index (CPI) can be controlled below 3% this year. The rise in commodity prices will also push up the production and operation costs of enterprises and erode their profits, thus having a negative impact on the production and operation of enterprises, especially small and medium-sized ones. China should adopt appropriate policies to hedge against the impact of rising commodity prices according to its own resource conditions, economic structure and macroeconomic situation.

Chen Zhongtao believed the impact of the rapid rise in commodity prices currently concentrated in the upstream raw materials and the construction sector, with a limited impact on the prices of middle and downstream manufactured goods and consumer goods. This round of commodity price increase is likely to last until the third quarter, after which it will gradually return to normal levels. Therefore, the domestic price level is expected to be generally controllable with moderate inflationary pressure. He viewed that China should focus on supply chain management, by cultivating internationally competitive enterprises which can offer commodity supply chain service, and continuously improving the professional service capability and financial operation capability of enterprises for supply chain.

Xu Gao said that the strongest round of global demand expansion since the subprime mortgage crisis is taking place. This is a major driver of this commodity price increase. As a result, the rise will continue for a span of time. Since this year, China's industrial production, exports, fixed asset investment, and retail sales of consumer goods have shown a clear recovery to the good. In March and April, the growth rate of aggregate financing to the real economy and broad money supply (M2) did not slow down despite of high growth from a large base figure, and commodity prices were obviously pro-cyclical. At present, the domestic manufacturing profit increases at large, indicating minor profit squeeze on the downstream industry posed by the commodity price rise and small impact on CPI by the international market. In the future, the rising trend of commodity prices and its impact will also moderate with the adjustment of domestic and international macro policies.

After the speeches, the experts interacted and exchanged views with the media. Virtually attended the meeting also some researchers and members from CCIEE, research institutions, enterprises and the media.