A man selects vegetables at a supermarket in Changchun, Northeast China's Jilin province. Photo: Xinhua

China's consumer price index (CPI) rose by its fastest annual pace in a year in June. Inflation - which remains persistently high not just in the US, but also in the European economies and beyond - has been causing headaches for the global economy, and in this environment, will a fresh sign of rising inflation pressure in China generate a spillover effect and add difficulties to the global economy?

China's June CPI rose 2.5 percent year-on-year, expanding from 2.1 percent in May, according to official data released by the National Bureau of Statistics (NBS) on Saturday. Among major economies, China is now nearly the only country keeping domestic prices basically stable. In this context, any slight increase in the CPI is likely to cause unnecessary concern and attract intense attention from overseas, which is understandable.

However, it should be noted that the 0.4-percentage-points increase is so tiny that little change has been made for the macro economy. Even if the country's inflation pressure continues to build in the second half of the year, China does not have to worry too much about the issue alone, because the economic logic behind China's inflation pressure is different from that in the West.

First, many Western countries, led by the US, adopted expansionary monetary and fiscal policies after the outbreak of the COVID-19 pandemic, and the huge liquidity they injected into the market causes not only serious inflation but also various thorny problems such as asset bubbles. US inflation is to some extent a reflection of the country's already dysfunctional economy. By contrast, China has been pursuing relatively modest monetary policies. June's CPI increase was mainly driven by a rebound in food prices, which contributed about 0.51 percentage points to the CPI increase. China routinely faces heavy rain during its summer months and the subsequent price rises for vegetable and meat will likely exert further upward pressure on inflation in the coming months. Is the global economy now too fragile to tolerate a rise of pork prices in China? The answer is an obvious no. The public does not need to be overly concerned about rising inflation pressure in China.

Second, the US Federal Reserve is under pressure to raise interest rates to quell the stubborn inflation, but sharp rate rises will drag down the US economy and pose huge risks to the global financial system. As for China, 2.5-percent "inflation" is not severe enough to cause a shift in the country's monetary policy. Inflation isn't top priority for the Chinese economy.

China's economy has showed signs of recovery in recent weeks after having a hard time in the prior months as the country battled against the outbreaks of COVID-19. The country is expected to adopt a package of measures in the coming months to keep major economic indicators within an appropriate range and to ensure stable overall economic performance. 

Given the considerable rise in global commodities prices, China has been facing imported inflationary pressure from overseas markets over recent months. As more shops reopen, more factories resume production, and the economy runs at full throttle, it will be quite normal for inflation to face some upward pressure over the coming months.

Overall, China's inflation risks are controllable and its negative effects, on both home and abroad, are manageable. Although China's consumer inflation climbed up in June, the 2.5-percent CPI rate is benign compared to Western countries, which means China still has significant room for a possible upward pressure on inflation. The "mild inflationary pressure" wouldn't stifle economic recovery. At the least, China doesn't have to worry about a US-style inflation crisis.