Beijing - Imported price pressures linked to the conflict in the Middle East are set to weigh on China’s economy, forcing policymakers to navigate an increasingly delicate balance between emerging inflation and slowing growth, a senior central bank adviser said on Tuesday.
Huang Yiping, a member of the monetary policy committee at the People’s Bank of China, made the remarks at a media briefing in Beijing, pointing to uncertainty over how long and how intense the external shock will be. He noted that domestic consumer inflation remains relatively subdued, providing some cushion for policymakers, but warned that the ultimate effect depends on the persistence and severity of the conflict abroad.
China’s year-on-year consumer inflation rate rose to 1.3% in February, the fastest pace in over three years, but it still sits under the government’s rough target of around 2% for the year as a whole. Huang flagged a specific concern for corporate margins from surging oil prices.
"What I am worried about the most is the shock to companies’ profitability from rising oil prices, as the squeeze would be very adverse for the real economy," Huang said.
He added that while monetary policy has limited ability to neutralize imported inflation, authorities would respond if price rises broadened. Huang emphasized the need to weigh inflationary pressures against the downside risks to economic growth.
"We will have to balance between the rising inflation and the downward pressures on economic growth."
PBOC Governor Pan Gongsheng has signaled that the central bank will keep policy appropriately loose, employing measures such as reserve requirement ratio cuts and adjustments to interest rates to ensure ample liquidity.
Taken together, the comments outline a policy challenge: imported inflation, particularly via energy costs, threatens corporate profitability and the broader real economy, yet the central bank’s room to maneuver is constrained. Officials appear prepared to act if inflation becomes more widespread, even as they maintain a stance aimed at supporting liquidity and growth.