【CGS-NDI Dynamic】 Postdoctoral Exchange Lecture Issue 1, 2026: The Transmission Mechanism and Impact of Current Price Levels

(Source: China Galaxy Securities New Development Research Institute)

On March 31, the China Galaxy Securities New Development Research Institute held the first postdoctoral exchange lecture of 2026 titled “Current Price Transmission Mechanisms and Impacts.” The lecture was delivered by Postdoctoral researcher Bo Yicheng from the New Development Research Institute. The event invited Zhang Di, Chief Macroeconomic Analyst and Head of the Aggregate Group at China Galaxy Securities Research Institute; Dr. Xu Dongshi, Co-Chief Macroeconomist and Head of the Academic Committee of the New Development Research Institute; and Wu Jing, Assistant Director of the Institute and Executive Leader of the Postdoctoral Research Station. Additionally, multiple scholars and industry guests participated both online and offline. The discussion focused on the rise in oil prices driven by Middle East tensions and the “re-inflation” logic, emphasizing how input shocks are transmitted through the industrial chain to the domestic price system, and exploring the evolution paths of CPI and PPI under demand constraints and policy regulation, as well as their impacts on the macro environment and capital markets.

Since the Middle East tensions have persisted and driven international oil prices higher, market attention to “re-inflation” has significantly increased, especially regarding whether imported inflation pressures will reshape the price center within the year, becoming a key issue in current macro expectations. However, judging inflation trends solely based on short-term fluctuations of CPI and PPI remains insufficient; the transmission mechanisms of oil price shocks, structural constraints, and policy responses are also critical variables. This session examined oil price shocks, price transmission, and re-inflation logic through a combination of historical review and empirical testing, systematically outlining the inflation evolution paths.

Historical data shows that the impact of oil prices on China’s price system exhibits a clear “strong PPI, weak CPI” characteristic. Research indicates that fluctuations in oil prices have limited influence on CPI but more significant transmission to PPI. This phenomenon stems from the greater sensitivity of industrial product prices to upstream cost fluctuations, coupled with increased global energy supply elasticity following the shale oil revolution and strengthened domestic demand constraints, which significantly reduce the transmission of oil prices to consumer prices.

The transmission mechanism of oil price shocks displays phased and nonlinear features. Price transmission mainly occurs through three channels: first, upstream costs are passed along the industrial chain to mid- and downstream sectors, directly affecting PPI; second, substitution effects spread within the industrial chain, gradually influencing prices of durable consumer goods and services; third, rising industrial product prices improve corporate profitability, indirectly supporting CPI through income and investment channels. However, historical experience shows that this process is not linear and is often influenced by demand conditions and policy environment. During periods of weak demand, enterprises tend to absorb costs by compressing profits or adopting substitute technologies, thereby reducing the transmission of prices to end consumers.

Overall, under different oil price levels, inflation paths vary significantly. If oil prices remain in a lower range, imported inflation pressures are relatively limited; but if oil prices continue to rise and surpass certain thresholds, they may trigger self-reinforcing inflation expectations, leading to increased price volatility.

After the lecture, participants engaged in in-depth discussions on the transmission mechanisms of oil price shocks, the evolution paths of inflation centers, and the macro and market impacts of re-inflation environments. Moving forward, the New Development Research Institute will continue to produce forward-looking and empirically supported research results aligned with market concerns.

                                                                                 Writer: Bo Yicheng

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