China's Economic Shocks Drive Global Inflation, Impacting Prices Worldwide.
China's supply and demand shocks impact global inflation dynamics significantly. Demand shocks have a slightly greater effect than supply shocks, especially on producer prices. Chinese shocks explain around 5% of international inflation on average. Both direct (import/export prices) and indirect (foreign competition, commodity prices) channels play a role. Variations in trade and commodity exposure help explain why different countries respond differently to Chinese shocks.