China’s reopening after 3 years of lockdowns could potentially be inflationary for several reasons. One is pent-up demand, which occurs when consumers have delayed purchases during a downturn and then spend more once the economy improves. This increased spending can lead to higher prices, as businesses raise prices to keep up with increased demand.
Also, Chinese citizens have accumulated savings during these years, and as they begin to spend those savings, it can add to the inflationary pressures.
The impact of China’s inflation on the global economy is likely to be significant, as China is a major player globally and its domestic inflation can lead to higher prices for goods and services that are exported globally.
Note that if China’s central bank raises interest rates to combat inflation, it can lead to capital outflows and a stronger Chinese currency, which can have a negative impact on the competitiveness of other countries’ exports.
Watch closely as to what China does as it will have an impact far and wide.
TOPICS AND TIMESTAMPS:
Inflationary Deflation What 0:00
What Could Make Change 7:03
Major Policy Error 10:40
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