From January to February 2026, China's CPI and PPI recorded cumulative year-on-year increases of 0.8% and -1.2% respectively, with the GDP deflator likely remaining in negative territory year-on-year for the first quarter. The March Government Work Report explicitly stated the need to "drive the general price level from negative to positive and achieve reasonable, moderate recovery in consumer prices." Concurrently, escalating Middle East tensions and intensified US-Iran conflicts triggered significant volatility in international oil prices. After hovering near $70 per barrel in late February, ICE Brent crude briefly approached $120 per barrel on March 9, marking the highest level since June 2022, before retreating below $100 on March 10 following former President Trump's statement about "quickly ending" the conflict.

While surging oil prices appear superficially aligned with the policy direction of promoting reasonable price recovery, this raises the question: is this the type of inflation we need? The significance of macroeconomic targets lies not in the numbers themselves, but in the real conditions of microeconomic entities they represent. The 4.5%-5% economic growth target seeks not output figures inflated by inefficient investment and inventory accumulation, but rather proactive business investment expansion and increased consumer willingness to spend, enabling genuine activation of economic internal circulation. Similarly, the approximately 2% inflation target aims not merely to push prices higher, but to break the negative cycle of "low prices→delayed consumption/investment→economic weakness" through moderate inflation, making corporate profit improvement and household income growth sustainable norms.

Oil price impacts on PPI manifest through four primary channels: directly elevating prices in petroleum extraction/processing; vertical transmission along industrial chains from basic chemicals to intermediate/final industrial products with diminishing effects; pushing up coal prices through energy substitution, extending to high-energy-consumption sectors; and systematically increasing logistics costs with broad inflationary effects. Transmission to CPI follows more complex paths: direct impact on fuel prices affecting transportation services; partial PPI transmission to consumer goods constrained by competition and demand elasticity; and indirect effects on food prices through agricultural inputs and distribution costs.

Analysis indicates each 10% oil price increase raises PPI and CPI by 0.4 and 0.1 percentage points respectively. Under five conflict scenarios ranging from rapid de-escalation (scenario 1) to full-scale war (scenario 5), full-year PPI could reach 0.4%-2.2% while CPI may range between 1.0%-2.1%. However, oil-driven price increases fundamentally differ from desired demand-pull inflation, creating four adverse effects: heightened living costs disproportionately affecting low-income households; profit compression for mid-downstream enterprises facing cost-demand squeezes; deteriorated trade terms and foreign exchange pressures for the world's largest crude importer; and potential constraints on monetary policy easing.

Notably, in current low-price conditions, imported inflation may yield unintended benefits: breaking deflationary expectation cycles as seen in Japan's recovery; improving upstream corporate conditions while reducing real interest rates; and enhancing fiscal revenue through price-level-linked taxes. Policy responses should combine supply-side measures (strategic petroleum reserves, price ceilings, energy diversification), targeted relief for affected industries/households, and macro-policy focus on core CPI/output gaps with enhanced expectation management.