“There’s definitely a risk [that inflation will increase]. It’s not just the position of exporters. It’s everything, from the bottlenecks caused in global shipping to the idea that the stimulus might unleash more demand than supply can keep up with,” said Nick Marro, lead analyst for global trade at the Economist Intelligence Unit. Even so, “it’s somewhat premature to assume that we are going to see runaway inflation at this point.”
What’s clear is that Chinese manufacturers making products for the rest of the world are finding it increasingly hard to hold the line on costs, especially after the pandemic and lockdowns hurt their profits last year. In the past, Chinese factories with cheap labor were often a force for keeping global prices for everything from jeans to sofas lower, but that’s becoming less true as the factories’ own costs climb.
Shipping rates, which soared in recent months amid port bottlenecks and container shortages, are part of the problem. In some cases, clients ask Chinese suppliers to share the burden. In other cases, Chinese factories themselves are having to pay more to ship in imported raw materials, like lumber.
Meanwhile, prices for many commodities have stayed high or kept climbing, and some businesses are choosing to pass those costs on to customers.