China Can Teach the West a Lesson on Inflation

China Can Teach the West a Lesson on Inflation

International and Arab News

Judging by the latest inflation numbers, developed nations are turning into emerging markets. The US reported 8.5% year-on-year jump in March, while inflation in the UK soared to 7%, a 30-year high. Meanwhile, Chinese consumers saw only a 1.5% rise in prices last month.

This is not how it’s supposed to work. If anything, inflation should be more pronounced in emerging markets, where logistics are less streamlined and commodities traders have fewer hedging tools.

President Joe Biden has pointed his finger at supply-chain disruptions, the fallout from Russia’s invasion of Ukraine and China’s renewed Covid restrictions. And he’s not entirely off the mark. Shanghai, the world’s largest port, is effectively closed, amid a lockdown to stamp out omicron. Right now, the city is too busy conducting daily mass tests and building makeshift quarantine hospitals to supply the world with electronics and toys.

As such, there’s an argument for shortening supply chains and bringing manufacturing to one’s home turf. For decades, American consumers benefited from the cheap labor in China. But it’s coming back to bite, as workers there are now forced to stay at home.

But supply disruptions are just one factor. How about inflation as a monetary phenomenon? In the