Input inflation: a black hand with raw material prices

Today, the Chinese people seem to have cried over higher and higher prices. People are still crying and tears, and textile raw materials soared all the way - cotton, chemical fiber, wool, and even to the cocoon and just set off flax raw material ups and downs, and then look at the expression of our textile business owners - it is already silent shouting. However, this form is not a bad one. For a long time, most of the operators of our textile companies have been hard-pressed to pull their own overloaded carriages. Nowadays, the complicated situation during the period of major economic changes has forced us to look up the road to economic development in the world and even the world. . With regard to the raw material boom, we cannot but look carefully at a term that is not new – imported inflation.

Imported inflation The so-called "inflationary inflation" in developing countries means that the root cause of inflation is not endogenous in a country's market, but because foreign inflation occurs in the form of international trade and is conducted into the country, from the outside. After the economic factors were transmitted to a country, the overall price level rose. In this regard, there is a clear statement in the economics dictionary.

Imported inflation occurs only in an open economy, which is right in our country. There are roughly two ways in which it occurs: The first is through the input of raw material prices. It is not difficult to understand that raw materials needed for the production of domestic commodities in a country can be met through domestic production or foreign import. If the price of raw materials imported from abroad rises, it will inevitably push up the prices of domestic related products. As far as our country is concerned, due to the depreciation of the U.S. dollar, its purchasing power is reduced, and more U.S. dollars are needed to achieve the previous purchasing power, that is, price increases. However, in order to ensure the price competitiveness of export commodities, China keeps the exchange rate and the U.S. dollar fixed at a very small extent. Therefore, when the depreciation of the U.S. dollar causes commodity prices to rise, there will be no appreciation of the exchange rate as a hedge. **The prices of these raw materials that are priced are also rising at the same time, which directly causes the price of related products to rise. At this time, because domestic consumers did not realize that this was an inflation, the prices of commodities based on domestic raw materials did not increase, resulting in no significant increase in the overall cost of living. This was ultimately reflected in the labor cost of money. And the domestic supply of raw material prices did not increase with the appearance of inflation, so that the performance of domestic prices did not rise significantly. However, when such prices are transmitted to the export industry, for example, China’s textile industry has been export-oriented for many years. As a result, the commodities are still exported at the pre-inflation prices. Although they are competitive in price, they are actually It is a resource within the 贱 **, that is to say, the temporary prosperity of the export industry is in exchange for the sale of domestic resources. Economists generally believe that such behavior is not desirable from the perspective of long-term sustainable development.

Let us look at the second way of inflation input - input through capital flows. In recent years, China’s ** reserves have been growing at a rapid rate. Some of them are foreign exchange earners in the export industry. At the same time, there is also a huge portion of foreign speculative capital inflows, which is what we call hot money. Because the inflation in the United States was caused by the Fed's spamming of currency, hot money has sufficient liquidity in the United States, and liquidity needs a chance to appreciate. China has become the target of international speculative capital. These speculative capitals do not engage in long-period investment in China, so they always flock to the capital market and real estate market. When a sovereign country imposes policy controls on the capital market and real estate market, it is affected by other unfavorable factors. At that time, these hot money will flow into the commodity market and other non-bulk commodity raw materials markets. What is particularly noteworthy is that when hot money with huge benefits is withdrawn, people who pay for them are often at the bottom of society.

Economists remind us that the severity of the impact of imported inflation on the domestic economy generally depends on the following factors: the gap between international market prices and domestic market prices; the proportion of open economy sectors in the overall economy; domestic policies Adjust and choose the degree of sensitivity. In general, the greater the gap between the international market price level and the domestic market price level (the level of domestic commodity prices is much lower than the level of the world commodity price system), the higher the proportion of the open sector in the overall economy, and the greater the sensitivity of domestic policy adjustment and selection. Bad, the impact of imported inflation on the domestic economy is also more serious.

The fact that imported inflation has pushed up the prices of raw materials and agricultural products cannot be ignored. When the second round of quantitative easing monetary policies of the United States opened the currency gates, hot money flowed into emerging developing countries, including China, as floods. As a result, the prices of international food prices and commodities (including cotton) soared sharply. At the same time, they also boosted domestic commodity costs and prices. The Governor of the People's Bank of China, Zhou Xiaochuan, once stated that the slowdown in the recovery of developed economies and the continued loosening of monetary conditions have caused some emerging economies to face certain capital inflow pressure. Although China’s overall economic situation is improving, it should also be vigilant. Zhao Xijun, deputy dean of the School of Finance at Renmin University of China, said that the hot money risk deserves a lot of attention. Large-scale short-term capital flows in and out very quickly, and it will have a lot of negative impact on the local economy. Inflows will increase the price level of the location where it is located, and at the same time stimulate the real estate market and the capital market to rise and create bubbles. On the other hand, once these capitals flow out in a short period of time, the real estate market and capital market will drastically drop, causing instability to the economic development, and serious financial crisis may occur.

"Some countries have started a new round of monetary easing policies to further boost the prices of raw materials and agricultural products. These new conditions will have a certain impact on China's economic development, including price movements. An important aspect is to increase inflation expectations." National Bureau of Statistics The spokesperson Sheng Laiyun said.

Under the ever-increasing expectations of inflation, the ordinary people began to think about how to “race” with CPI gains: Some people began to scrounge for money; others bought more rice, noodles, vegetables, or filled homes with electric cards and gas cards. Doing "hoarding families"; others will buy more funds into gold and other investment products, in order to preserve assets and hedge inflation. However, experts assert that the fundamental factors that currently push up CPI cannot be changed in the short term, such as the quantitative easing monetary policy headed by the United States, rising labor costs in China, and marketization of factor resource pricing.

From the perspective of the textile industry, cotton and many categories of chemical fiber raw materials have risen, wool has been leading all the way, and silkworm cocoon is not to be outdone. Recently, it is reported that “the state-owned large company Beidahuang Group has purchased large quantities of flax raw material in Europe”. "The group spent 400 million yuan on ***, whistling 20,000 tons of flax fiber in the European market, accounting for 2/3 of the current total in Europe's linen inventories. This immediately led to an increase in international flax fiber prices. According to reports, the “Great Northern Wilderness” is a state-owned listed company with a strong financial strength. The large purchase of flax raw materials this time further pushed up the price of European flax raw materials. As China's flax industry has long been in the raw materials and markets “two out”, on July 4th, China Wool Textile Industry Association held a vice president (flax) seminar in Beijing to study the status quo of the industry, discuss solutions, and appeal to the society at the same time. All parties maintain the overall interests of the linen textile industry. Although this is a case, it is not difficult to see the passive status of our textile production enterprises. Du Jianbin, the Ministry of Agriculture's cash crop department, who was invited to attend the seminar on flax industry, had a few words that were thought-provoking: “Today we had a raw material to buy raw materials. We are so sincere and fearful, then we will come out tomorrow. The Great Southern Wilderness has to buy raw materials. Nothing wrong, market economy, capital is king! So, we flax companies will not live yet? The key is that we have to transform ourselves! For so long, we do not do raw material base construction; we It is not a good way to develop flaxseeds that can be made into high-grade textiles in the domestic market.We don't start from looking for the industry itself to change, starting from the bit by bit, solidly, the wolf is coming, what are we waiting for? ?"