Source: Global Times    Published: 2021-06-10

The top official at China's banking watchdog on Thursday warned that monetary easing in developed countries has reached an unprecedented level, fueling global inflation that will be felt by the entire world, while noting that China's products are serving as a "key anchor" in stabilizing inflation.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at the Lujiazui Forum in Shanghai that the "extraordinary measures" taken by developed countries to boost their economies will have negative impact on every country, including soaring financial market and runaway inflation following endless money printing.

Guo also pointed out that in contrast, products made in China have been serving as a "key anchor" in stabilizing global inflation.

Since the outbreak of the COVID-19 pandemic, central banks of developed economies have been drastically loosening their money supply. The balances of US Federal Reserve have grown to almost $8 trillion, ten times the volume in 2008, while the ratio of the US' federal debt to its GDP has climbed to a record high since the Second World War, according to media reports.

The balance sheets of European banks have more than doubled, and in Japan it has increased by more than a quarter.

The easing of the money supply has already triggered widespread inflation globally. In the US, the Consumer Price Index rose 4.7 percent year-on-year, exceeding the 4.2 percent growth in April, which was already the fastest growth pace in more than 13 years.

"It's like climbing mountains. It is hard to go up, but it's even harder to go down," Guo said.

Tian Yun, former vice director of the Beijing Economic Operation Association, told the Global Times on Thursday that the extraordinarily loose monetary policies among developed countries are for stabilizing their economies, and it is also politically driven to win popular support.

"For developed countries, the costs of loose monetary policies are disproportionately small because of their industrial and economic structure," said Tian. "But the consequences will be borne by other countries."

In May, China's producer price index (PPI) grew by 9 percent year-on-year, the fastest pace since 2008. While the rising costs have been weighing heavily on the manufacturing sector in China, it is largely driven by "easing global liquidity", according to China's National Bureau of Statistics.

In comparison, China's sophisticated industry chain means that China has the capacity to tame global inflation, making it a "key anchor" in the global economy, Tian added.

China has provided around half of the global end products for a very long time, without raising the export price, setting a solid foundation of global economic recovery, Guo said during the forum.

He Weiwen, a former senior trade official and an executive council member of the China Society for World Trade Organization Studies, told the Global Times on Thursday that China accounts for 28 percent of the global manufacturing industry and one sixth of global export volume.

"China's large amount of export mid-end products with good quality, which directly flow into downstream industries or consumers, is helpful for containing global inflation," said He.

The author is former economic and commercial counselor at the Chinese Consulates General in San Francisco and New York, and senior fellow of the Chongyang Institute for Financial Studies at Renmin University of China(RDCY).

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