This paper studies the effect of imported product
structure change on inflation, and distinguishes between ordinary trade imports
and processing trade imports. Results show
that both high-technology products and low-technology products such as
bulk commodities are of high proportion in China’s import structure. The former
is mainly for general trade, while the latter is mostly for processing imports,
which weakens its impact on domestic price. With China’s increasing dependence
on international resources such as petroleum and minerals, the changes of
international oil prices as well as other bulk commodities will be an important
variable affecting China’s inflation level.
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