Nikkei:
Recently, due to the impact of geopolitical conflict, commodity prices have risen sharply, which will inevitably have a negative impact on the Chinese economy to a certain extent. How will the NDRC mitigate the impact of rising commodity prices in order to sustain growth? Thank you.
Hu Zucai:
Changes in the prices of commodities such as grain, energy and minerals are related to people's wellbeing, industrial and agricultural production, and the macroeconomic market. Stable prices will ensure an orderly market, stable economy and society. The CPC Central Committee and the State Council attach great importance to the work of ensuring the supply and price stability of commodities.
Last year, due to factors such as the COVID-19 pandemic, excess liquidity and supply bottlenecks, the prices of international bulk commodities such as oil, natural gas, coal and iron ore rose sharply, driving up global inflation. Prices in many countries hit multi-year highs. For example, the U.S. consumer price index (CPI) rose 7% in December last year, hitting a 40-year high. China's economy is deeply integrated into the world economy. We purchase a relatively high proportion of oil, natural gas, iron ore and other commodities. Rising international prices have increased imported inflation pressure and pushed up the prices of domestic energy and raw materials. In October last year, the domestic producer price index (PPI) reached 13.5%, a new high for many years, which had an adverse impact on the production of enterprises and people's lives, and brought challenges to the stable operation of the macro economy. We fully implemented the decisions and arrangements of the CPC Central Committee and the State Council, coordinated pandemic controls and economic and social development, coordinated development and safety, took multiple measures, and adopted a series of measures to ensure supply and stabilize prices such as making supply and demand adjustments, carrying out market supervision and guiding expectations. All these measures have achieved positive results. The overall domestic price has remained within a reasonable range. Last year, China's CPI rose by an average of 0.9%, in sharp contrast to the high inflation in major international economies, playing an important role in stabilizing global prices.
Since the beginning of this year, influenced by multiple factors such as the COVID-19 pandemic, the adjustment of monetary policies of major economies, and in particular, the aggravation of geopolitical conflicts, the trend in global commodity prices presented to be more challenging and complicated with uncertainties. In recent days, the global oil price surpassed the US$110-per-barrel mark and soared to $139 today. Prices of coal, natural gas, and iron ore remained high, and there is a rising trend in prices of corn and other grains. All these pose a challenge to our work of ensuring domestic supply and stabilizing prices.
Generally speaking, China's economy features strong resilience and large market space. With abundant policy tools, particularly bumper grain harvest in consecutive years, adequate production of hogs, and sufficient supply of industrial and agricultural products and services, China has all the necessary conditions as well as the capability and confidence to continue to keep prices running smoothly. Therefore, the projected target for CPI increase at around 3%, which was set in this year's government work report, is achievable. In January of 2022, China's CPI rose by 0.9% year-on-year, much lower than the percentages in the United States and the eurozone, which were 7.5% and 5.1%, respectively. The year-on-year increase of PPI fell back to 9.1% in January, which was also substantially lower than the level of more than 20% in the eurozone.
To ensure the supply and stabilize prices of commodities are of weighty responsibility. Faced by the complicated and grave situation this year, we will resolutely implement the decisions and arrangements of the CPC Central Committee and the State Council, evaluate worst-case scenarios, implement policies in a comprehensive way, and strengthen precision regulation so as to make every effort to ensure the supply and stabilize prices of commodities.
First, we will make efforts to ensure the supply and price stability of grains to guarantee food security. Grain prices are the basis of all prices. The stability of grain prices can provide solid support for our efforts to stabilize all prices. China has sufficient stocks and supply of rice, wheat, and other types of grains, and therefore is fully self-sufficient. This year, we will ensure a stable sowing area and grain output and make efforts to ensure the supply and stabilize the price of chemical fertilizer. In this way, we will manage to keep grain output sufficient and its price stable, so as to ensure that the Chinese people can hold their bowls firmly. At the same time, we will strengthen our work to ensure the supply and the price stability of corn and soybeans, tap domestic potentials, make more efforts to improve the production capacity of soybeans and oilseed crops, reasonably make use of global resources, strengthen reserve adjustment, and maintain the balance between supply and demand.
Second, we will make efforts to ensure supply and price stability of energy to guarantee energy security. We will focus on the work to stabilize coal supply and prices. China's coal consumption accounts for 56% of the total energy consumption, and coal-fired power generation accounts for about 60%. If the coal price is stable, then the electricity price will be stable accordingly, and furthermore, the fundamentals of energy price will be stable. Recently, the NDRC issued a notice to further improve the pricing mechanism for the coal market, aiming at improving range-based regulation for coal prices and creating synergy between an efficient market and a well-functioning government. Next, we will fully carry out this major reform to ensure the implementation and effectiveness of reform measures. We will improve the coal production, supply, storage, and marketing system, improve the adjustment capacity of supply and demand, ensure a reasonable and sufficient production capacity, strengthen market expectation management, guide coal prices to run within a reasonable range, and improve the transmission mechanism of coal and electricity prices, so as to ensure a secure and stable supply.
Third, we will make efforts to ensure supply and price stability of major minerals to guarantee the security of industrial and supply chains. We will intensify our efforts on domestic exploration and development of iron ore, accelerate the construction of mineral products bases, expand the recycling of steel scrap and other renewable resources, enhance support capacity of domestic resources, strengthen import and export adjustment capacity, and resolutely curb the blind expansion of energy-intensive, high emission, and low-standard projects, so that we can ensure a secure supply and basic price stability of major minerals.
Fourth, we will keep a close eye on market trends and strengthen law-based market supervision. We will pay close attention to the supply and demand and price performance of key commodity markets and strengthen monitoring and analysis to keep abreast of the situation. We will keep high-standard market supervision and strengthen coordinated supervision of futures and spot markets. We will crack down on the fabricating and spreading word of possible price increases, price gouging, hoarding and profiteering, other violations of laws and regulations, and malicious speculation of capital in particular.
Fifth, we will make solid efforts to guarantee a basic living to people who encounter difficulties to ensure that their basic living needs are met. We will guide localities to earnestly implement a linkage mechanism of subsidies, and provide temporary subsidies in full and in a timely manner to effectively guarantee a basic living to people in difficulties.
