Consumer price inflation target depends on policy continuity

The consumer price inflation target of around 3 percent that China set for this year in the Government Work Report, as in the past two years, will not only help to maintain the continuity of its policy targets and stabilize market expectations, but also shows its determination to keep prices stable.

Despite sharp rises in global food and energy prices and huge imported inflationary pressure, the monthly increase in China's consumer price index was always less than 3 percent in 2022, and 2 percent in the whole year, much lower than the 8.0 percent in the United States, 8.4 percent in the eurozone, and 9.1 percent in the United Kingdom.

It was also significantly lower than the 6 to 10 percent CPI growth in emerging economies such as India, Brazil and South Africa. From a five-year or 10-year perspective, China's average inflation rate is also around 2 percent, a long pursued inflation target for major economies.

China has always made price stability an important macro policy goal, strengthening the development of the systems for production, supply, storage and marketing of grain and energy, and strengthening price control on important commodities related to people's livelihoods and bulk commodities. Also, it has effectively implemented a prudent monetary policy and refrained from flooding money, laying a solid foundation for stable prices.

Considering that prices still face unstable and uncertain factors in 2023, China's 3 percent CPI target takes into account not only its low price increase in the past two years, but also imported inflationary pressures and possible upward pressures brought about by the recovery of domestic demand. China has the world's most complete industrial system and a super-large domestic market with huge potential. In particular, it has had bumper harvests in grain production for many consecutive years, and its pig production capacity is sufficient, basic energy security strong, and supply of industrial and agricultural products and services abundant.

With the improvement of its economic performance, the accelerated recovery of its business entities, and the smooth circulation of its industrial and supply chains, the positive factors that help China maintain price stability have been on the rise.

In 2023, the authorities should continue to focus on maintaining stable prices and strike a balance between maintaining economic growth and preventing inflation. China should keep a close watch on price changes to protect people's rice bags and vegetable baskets.