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China Is the Wild Card for Global Inflation in 2023

The country’s long-awaited emergence from Covid Zero would ignite its economy and put upward pressure on prices around the world.

Chinese President Xi Jinping.

Chinese President Xi Jinping.

Photo illustration: 731; Photos: Alamy; Getty Images

The broad view for next year is that inflation around the world will slow as interest rates rise, recession looms and consumers spend less. Cooling commodity, food and energy prices, magnified by the favorable comparison with last year’s steep gains, will combine to slow the broad rate of inflation.

But China’s reopening could rattle those expectations. The scenario goes like this: At some point in 2023, China opens its borders for the first time since the early days of the pandemic. The implications for the rest of the world would be seismic. China’s domestic economy would come back to life. Students would go overseas again, tourists would start to travel, and business executives would get back on planes. This would be happening at the same time China’s housing market starts to recover, further fueling consumer spending.