Xinhua News Agency:

Inflationary pressures in some countries have drawn much attention in the market. The central bank warned against future inflation risks in its report. Does the central bank think there will be inflation in our country in 2023? How will the central bank respond to the risk? Thank you.

Zou Lan:

It was indeed mentioned in the monetary policy report of the third quarter of 2022. We have also noted that discussions from all walks of life have been quite heated since the report was released. Mr. Xuan Changneng, vice governor of the PBC, also mentioned it just now. Last year, many countries around the world endured the highest inflation in decades. In stark contrast, China has kept price levels basically stable. Our achievements did not come easily. If we look back over the past five or 10 years, we can see that China's consumer prices have sustained an average annual growth rate of around 2%, which fully proves the strengths of our socialist system and the effectiveness of macro regulation. This also benefited from the resolute implementation of the decisions and plans of the CPC Central Committee and the State Council and coordinated efforts to ensure supply and price stability in key areas such as energy and food. At the same time, we have followed a prudent monetary policy and refrained from adopting a deluge of strong stimulus policies to foster a sound monetary and financial environment for price stability.

In 2023, China's inflation is expected to remain moderate, but we should also pay attention to the potential for an increase. On the one hand, China's inflation is expected to remain stable due to abundant supply and recovering demand, and we did not issue excessive currency. Currently, China's economy is still on a path of recovery, and the industrial and supply chains are operating smoothly. However, inadequate effective demand is still a prominent problem, and the output gap is still negative. In the short term, inflationary pressure is generally under control. In the medium and long term, as one of the world's major producers, China will continue to maintain a general balance between supply and demand, pursue a prudent monetary policy, and have stable inflation expectations. All these will provide favorable conditions to keep prices basically stable. On the other hand, there is still uncertainty about price levels, so we must not lower our guard against inflation. We must keep a close eye on the possibility of further inflation. Domestically, for some time, M2 growth rate in China has remained high, and the possibility of a lag in the impact on prices cannot be ruled out. As China optimizes its COVID-19 prevention and control measures, people's ability to consume will gradually improve, and aggregate demand will also increase, which is likely to put upward pressure on inflation. Internationally, geopolitical conflicts could disrupt global energy supplies and inflation could remain high throughout advanced economies, so we need to be wary of imported inflationary pressure.

In the next stage, the PBC will adhere to the general principle of seeking progress while ensuring stability, pursue the strategy of expanding domestic demand, and deepen supply-side structural reform, while prioritizing efforts to stabilize growth, employment, and prices. The bank's prudent monetary policy will be targeted and effective, eying short-term and long-term effects at the same time, balancing between economic growth and stability of prices, and pursuing both internal and external equilibrium. Furthermore, the bank will strengthen coordination among policies to promote the effective improvement of the economy's quality and reasonable growth.