China is experiencing a problem with rising inflation rates which are driving up prices globally. Recently, CNN business news has indicated that China’s inflation is getting worse. In October this year, the prices of commodities originating from China industries increased at a high rate, and there are growing indicators that customers are feeling the pinch (Business, 2021). Likewise, China’s National Bureau of Statistics has analyzed that there has been an increase in the PPI to 14% in October from 10% in September this year (Business, 2021). As a financial manager running my company, the rise in prices of commodities will decrease the purchasing power of the foreign currency used by investors and potential customers across the globe.
The inflation problem in China is so rapid that manufacturers are imposing higher prices of various commodities to clients across the globe. Also, supply channels of products have been disrupted due to the continuing COVID-19 pandemic that has resulted in the closure of many physical stores worldwide (Gouda & Saranga, 2020). As a financial manager, the inflation crisis will affect my potential clients from coming to purchase various commodities in both online and physical stores. During the event of an inflation crisis, the company tends to invest and spend more money which in turn leads to a greater inflation crisis.
The public’s panic buying and wild online speculation were spurred by the abrupt warning. Consumer inflation has risen due to rising prices for vegetables and gas. Due to severe rain and high transportation costs, the overall cost of vegetables climbed by 16% in October this year (Business, 2021). Crops have been harmed by extreme weather, and officials have recognized that the cost of traveling between regions may rise as a result of rigorous procedures aimed at preventing COVID-19 outbreaks. The rising costs of vegetables will result in a loss of customers and the cost of borrowing from various investors will be much high. Many employees working in the company will lose their jobs since the company operates at a loss.
As a result of the prolonged energy crisis in China, rising coal mining and processing costs were also a major contributor to producer price inflation. There has been a rise in gasoline and diesel costs to about 30% (Zhang et al., 2020). The world’s second-largest economy is already growing at its slowest pace in a year as a result of energy problems, shipping difficulties, and an emerging housing crisis. Inflationary pressures in the country are causing major havoc worldwide. Rising manufacturer inflation is generating upward pressure on global inflation, given China’s status as a global manufacturing company and its importance to the supply chain network.
As a financial manager running my financial company, the crisis will affect my effective strategies to reduce the workload and the labor the employees undertake at my company. The production capacity will be affected and failure to meet the consumer requirements (Heinrich et al., 2021). The information systems in the company will be decentralized to develop more efficient procedures in the back office.
Adaptation of high-resolution spending visibility will be affected when in charge as a financial manager. The crisis inflation will disallow me to see exactly where money is spent and who is spending it. All subsequent productivity in the company attempts is crushed on this basis (Hunt et al., 2018). It hinders the appropriate amount of accountability throughout the organization, ensuring that all choices are taken with full knowledge of the financial implications. Similarly, the cost of consumption will be greatly increased in both physical stores and online platforms.
The inflation crisis affects the economic growth of a financial company. It poses a negative influence on the overall performance of an organization. The crisis results in the loss of employment to workers and financial resources are wasted. Therefore, financial managers must be alert at all times and ensure that proper management of the resources is well-taken care of. In order for the financial market to keep improving, legislators must push economic legislation to keep inflation rates low and generate economic growth.
References
Business, CNN. (2021). China has a big inflation problem and it’s pushing up prices worldwide. CNN. Web.
Heinrich, J., Henderson, S., Holland, T., & Portanova, M. (2021). 6 Strategies to help your company weather inflation. Harvard Business Review. Web.
Hunt, W., Mara, M., & Nankervis, A. (2018). Hierarchical visibility for virtual reality. Proceedings of the ACM on Computer Graphics and Interactive Techniques, 1(1), 1-18.
Gouda, S. K., & Saranga, H. (2020). Pressure or premium: what works best where? Antecedents and outcomes of sustainable manufacturing practices. International Journal of Production Research, 58(23), 7201-7217.
Zhang, G., Zhang, J., & Xie, T. (2020). A solution to renewable hydrogen economy for fuel cell buses–A case study for Zhangjiakou in North China. International journal of hydrogen energy, 45(29), 14603-14613.