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Economics
The Big Take

The World’s Next Big Inflation Surprise Is Looming In China

This is meant to be the year global inflation retreats back to target. A boost to demand as China exits Covid lockdowns might keep it higher for longer. 

Early signs from the Lunar New Year holiday in China show travel and box office spending significantly stronger than a year ago.

Early signs from the Lunar New Year holiday in China show travel and box office spending significantly stronger than a year ago.

Photographer: Qilai Shen/Bloomberg
Updated on

China’s reopening is set to provide a welcome boost to global growth, offsetting weakness in Europe and a looming recession in the US. But unlike in 2009, when China’s four-trillion-yuan stimulus helped kickstart a recovery from the Lehman slump, in 2023 there’s a catch — a boost to inflation at exactly the moment the Federal Reserve and other central banks race to bring it back under control.

That’s why Kristalina Georgieva, the head of the International Monetary Fund, said this month that China’s pivot from Covid Zero is probably the single most important factor for global growth in 2023, but cautioned on what it might mean for inflation.