Academic literature on the topic 'Labor supply – China'

This paper identifies the causal effect of commute time on labor supply in urban China and provides implications for the development of active commuting. Labor supply is measured by daily workhours, workdays per week and weekly workhours, and city average commute time is adopted as an instrumental variable to correct the endogenous problem of individual commute time. We find that in urban China, commute time does not have effect on daily labor supply but has negative effects on workdays per week and weekly labor supply. These results are different from those found in Germany and Spain, and are potentially related to the intense competition among workers in the labor market of China. Moreover, the effect of commute time on workdays per week is stronger for job changed workers. In addition, the effects of commute time on labor supply are not different between males and females. Finally, policy implications for active commuting are discussed.

The analysis in the field of labor supply including the topic of general interest and frontier progress has a significant impact on the mobility and the development of the Chinese labor force. Based on the software of Citespace, this essay makes an in-depth study on the research achievements in the labor supply field published in CSSCI journals from 1998 to 2021, draws a knowledge map and systematically analyzes the research hotspots and frontier progress in this field. The results show that the hot areas of domestic labor supply research include demographic dividend, labor force, severe labor shortage, aging, unemployed people, demand, medical insurance, and so on. The latest research frontier in the field of labor supply in China is related to delayed retirement, manufacturing, artificial intelligence, aging, and intermediary effect. All the research is closely related to the national policy orientation. In the future, it is suggested to strengthen communication and cooperation between scholars and research institutions from a multidisciplinary perspective, enhance research and collaboration in the field of labor supply, reinforce the construction of facilities in labor supply, build a labor supply service system and constantly innovate the development model to promote the development of social integration.

This paper evaluates the effect of China’s New Rural Pension Scheme (NRPS) on the retirement sustainability in forms of formal labor supply and informal labor supply in terms of care of grandchildren, using data from China Health and Retirement Longitudinal Study (CHARLS). We explore the regional differences of the NRPS effect on labor supply between the West and the other regions of China. Our analysis shows that rural Western China has a more severe problem of “ceaseless toil” compared to the rest of the country. We find that NRPS improves the “ceaseless toil” situation of the Chinese rural elderly especially in Western China. Our results suggest the need to increase the amount of NRPS payment, and to develop a region-specific pension programs in China.

Purpose Since the implementation of the New Cooperative Medical Scheme (NCMS) in 2003, this program has experienced rapid growth. Even so, little is known about the association between NCMS expansion and labor force supply among rural residents in China. The purpose of this paper is to examine the effects of the NCMS on labor force supply for rural Chinese populations. Design/methodology/approach Using data from the China Health and Nutrition Survey (CHNS), a difference-in-differences (DD) approach is employed to estimate the impact of NCMS expansion on labor supply outcomes, including hours of worked in agriculture, off-farm labor force participation, not working, and weeks off due to illness. A number of falsification tests are conducted to identify whether the assumption of common trends of DD analyses is satisfied. The robustness of results is checked through additional estimation, including panel fixed effects and instrumental variable approach. Findings Results show that the NCMS expansion has a positive effect on the hours of worked in agriculture and off-farm labor force participation, and reduces the likelihood of not working and weeks off due to illness. The effect on hours of agricultural production is larger for male adults, those aged 50 or more, and individuals in low-income families. This study demonstrates the importance of potential health improvements from public health insurance in promoting rural residents’ labor productivity. Originality/value Studies concerning the effects of public health insurance on labor supply in developing countries remain limited. The findings of this study provide important insights into how public health insurance programs, like the NCMS, may affect patterns of labor supply among rural residents, and can help policymakers improve health policies aimed to reduce the number of uninsured farmers while maintaining high levels of labor supply, productivity, and health status among the most vulnerable of populations.

Social security primarily improves residents’ welfare and ensures labor market sustainability. This study presents a new view of the association between health insurance and labor supply by using data from the China Health and Retirement Longitudinal Study. The results reveal that the health insurance system has a remarkable effect on labor supply. The health insurance coverage tends to encourage middle-aged and elderly farmers to increase their farm labor participation rate and working time, especially for their household agricultural labor participation rate and working time. However, it also reduces the non-farm labor participation rate and working time. Different types of health insurance have diverse effects on labor supply. The new cooperative medical insurance has a stronger pull-back effect. It encourages the middle-aged and elderly farmers to leave the urban non-farm sector and transfer to rural areas to engage in their household agricultural work. The urban employee medical insurance encourages farmers to reduce self-employed labor supply and increase employed work. The supplemental health insurance tends to reduce the labor supply of farm employed and non-farm labor supply, but improve the farm labor supply. Furthermore, urban resident medical insurance and government medical insurance encourage farmers to quit directly from the labor market. In conclusion, the health insurance system is facilitating change in the labor market. Policy-makers should pay full attention to such impacts while improving the health insurance system’s design and operation in China.

Between 1880 and 1939 Burma, Malaya, and Thailand received inflows of migrants from India and China comparable in size to European immigration in the New World. This article examines the forces that lay behind migration to Southeast Asia and asks if experience there bears out Lewis's unlimited labor supply hypothesis. We find that it does and, furthermore, that immigration created a highly integrated labor market stretching from South India to Southeastern China. Emigration from India and China and elastic labor supply are identified as important components of Asian globalization before the Second World War.

This dissertation consists of three essays studying the determination and evolution of labor supply in China. The analysis especially focuses on the labor market behavior of the wage workers with urban registration (Hukou). The first chapter outlines the dissertation by briefly discussing the motivations, methods, and main findings in each of the following chapters. Chapter two examines the evolution of female labor supply in urban China. Female labor force participation rate in China has been declining rapidly over the last three decades. Using a time series of cross-sections from the Chinese Household Income Project Series (CHIPS), this chapter attempts to systematically relate the decrease in female labor force participation to the socio-economic changes happening in China during the same period, and assess their respective contributions. Adopting both linear and non-linear decomposition techniques, the results show that during 1988-1995, changes in population age distribution and family size both contribute, during 1995-2002, age effect dominates, and during 2002-2007, non-labor income effect dominates in explaining the decreasing trend in female labor force participation. Chapter three investigates the impact of social norms on married women's labor supply decision in China. Using data from the China General Social Survey (CGSS) and the China Family Panel Studies (CFPS), we find a strong and robust positive correlation between the labor supply behavior of a married woman and the former work experience of her mother-in-law. Our estimation results indicate that being raised by a working mother influences both a man's attitude toward gender roles and his household productivity, and therefore married women whose mothers-in-law were not working are themselves significantly less likely to participate in the labor force. The last chapter evaluates the labor market consequence of rural-to-urban migration in China. Starting from the mid-1990s, there is a remarkable increase in the number of migrant workers in cities, from around 39 million in 1997 to 145 million by 2009 (Meng et al. 2013). Chapter four intends to explore how does this important economic event affect the labor market conditions of urban residents. Specifically, we estimate the possible employment and earnings displacement effects of rural-to-urban migration on urban residents by exploiting regional variation in the rural migrant share of education-experience cells. We use multiple sets of instrumental variable to address the potential endogeneity problems associated with the rural migrant ratio in a city. The estimation results are consistent with the predictions of the textbook model of a competitive labor market, indicating the inflow of rural migrants reduces the wage and labor supply of competing urban residents.
Ph. D.

The thesis analyses the current situation of the labour force in China, including its dimensions, composition, structure, distribution and participation patterns. Furthermore, based on this, a projection is made of the future supply of the labour force in China during 1982-2002. The analysis is based mainly on 1982 Population Census data. The thesis is organized in six chapters. The first one is an introduction in which the importance and definition of labour force studies and some basic background information about China will be explained. The second and third chapters analyse the current situation of the labour force and trends of labour force participation. It is demonstrated that rapid growth of the labour force in China since 1949 has resulted in continuing structural problems which have not been conducive to development of a modern economy. These two chapters are also the preparation for constructing tables of economically active life and labour force projections in the next two chapters. Here it is shown that the structural imbalances in the labour force of China are likely to continue. The last chapter is a summary of the thesis. Some suggestions or questions are presented in this chapter, based on the work in previous chapters.

It has been widely documented that migrant labourers have made great contributions to the urban economy of China; as well, the explosive growth of rural-urban migrants has generated several "migration problems," such as growing social inequality in urban China. It is widely reported that a large number of migrants have returned to their places of origin, after several years of "urban life," and this trend has been accelerated after the global economic crisis after 2008. Consequently, the large number of return migrants have created many problems in the cities, such as labour shortage in the manufacturing industry, and also posed a huge challenge to the rural areas in the resettlement of these returnees. In sum, to understand both the migrants in destination cities and return migrants in their places of origin is of great importance for both urban and rural development in China. The research so far, on the understanding of migrants' behaviour and labour market outcomes in a multi-phased migration process, seems highly controversial and therefore, insufficient. This study, based on migrant survey data collected in Fujian Province, and return migrant interview data collected in Sichuan and Jiangxi Provinces, explores migrant labour market outcomes in the cities, as well as their geographical differentiation; migrant return intentions, and their gender differentiations; return behaviour and the resettlement situations of actual returnees. The results show that the multi-phased migration process of rural migrants in China is synthetically shaped by macro, meso, and micro factors, and by the interactions between these factors. To be more specific, findings of this study indicate that migrant labour markets in urban China are largely geographically differentiated according to several regional characteristics. The study also finds that a large proportion of rural-urban migrants intends to return to their places of origin. As well, their return intentions are significantly gender-differentiated. Finally, the resettlement situations of return migrants are closely connected to their migration experience.
ix, 160 leaves : ill. ; 29 cm

AbstractTasked with feeding 1.4 billion people, China often promotes its success in food security in relation to its self-sufficient grain production. In the post-socialist context, the reformist state has been pursuing a capital-based vertical model to integrate millions of smallholding producers into the market. Yet, the introduction of high-yield hybrid rice to increase production has resulted in a set of related crises, including widespread environmental pollution, food-safety issues and adverse impacts on rural life. However, agrarian communities are challenging these state-imposed practices of food production. This chapter explores an endogenous form of regenerative agriculture that has emerged in South China since the early 2000s, a Chinese form of food and farming activism for reviving community agrarianism. I argue that the revitalization of “traditional” farming practices as a form of xaingtu (rural) knowledge has evolved with and through local peasants’ experience and struggle over the decades. One example that combines diverse aspects of such knowledge is the “fish-duck-rice paddy”, a well-known symbiotic method of pest control that also works with native varieties, organic manure and cooperative labour. This method revives peasants’ experience of the Mao era as a cultural reference for community agrarianism. The revival of community agrarianism allows farming to be narrated as an evolving social and historical practice, not “wasting” peasants’ knowledge, in contrast to the capitalist agrarian transformation.

AbstractChina’s economy has experienced dramatic growth in the last 30 years and in relation to seafaring labour supply many expected that Chinese seafarers would eventually come to dominate the world seafarers’ labour market. In fact, although the number of Chinese seafarers in the international fleet has grown steadily since the 1990s, the increase has been slower than many international shipping industry commentators and academics predicted (BIMCO/ISF 1995; Li and Wonham 1999; Sharma 2002; Wu 2004; Wu et al. 2007; Zhao 2017).

How Has Globalization Contributed to China’s Pollution? As discussed in Chapter 3, globalization has fueled much of the economic growth China has enjoyed since 1980. With its large labor force, low wages, and large supply of cheap energy, the country became the “workshop...

Employment is the largest livelihood of more than 1.3 billion people and the most basic support for economic development. The Communist Party of China (CPC) Central Committee and the State Council insist on giving priority to employment in economic and social development, encourage the creation of a favorable environment for mass entrepreneurship and innovation, and maintain overall stability in China's employment situation, coupled with the new employment model of de-employerization and platformization along with the technological progress of the Internet and the upgrading of mass consumption. However, we should also see that there are still many difficulties and problems in the current economic and social development, the new employment form breaks the old industry and legal order under the interest relationship and management norms, the traditional employment groups, management means, labor law system, employment service management, social security policies and so on to form an impact. In order to alleviate the current situation, our country should actively explore the innovative mechanism of the government to provide public services to promote employment, and the author also puts forward some suggestions from the following aspects through his own research: first, to establish the diversified public employment service supply mechanism which is government-led, market and social supplement; from the above aspects, the quality and efficiency of the supply of public employment services under the new industry are improved from the above aspects.

Abstract With China committing to achieve carbon neutrality before 2060, the operator has set ambitious targets for minimizing carbon emissions from its oil and gas operations. Two extensive offshore oil fields – QHD32-6 and CDF 11-1 oil fields have been modified to transform its power solution from offshore generation to power from shore (PFS) to reduce carbon emission, improve offshore energy efficiency etc. The two fields comprise 25 production platforms, 2 FPSO with 21 crude oil generators and 9 gas turbine generators. The total peak power demand is about 200MW. Both QHD32-6 and CDF 11-1 oil fields have established their own offshore micro power grid by interlinking centralized offshore generation platforms via 35kV and 10kV submarine cables. This paper first reviews the company strategic factors as well as the national regulatory drivers behind the decision to pursue whole-scale electrification of two super complex offshore oil fields. It then explores technology challenges and solutions by means of a high voltage AC PFS such as tie-in point selection, reactive compensation considerations, key economic criteria such as operation and energy costs, and asset depreciation etc. Considering the consequences of production loss due to power outage, stringent reliability requirements were adopted. A high-speed transfer combine with a 62.3km 110kV interconnecting submarine cable between QHD32-6 and CFD11-1 offshore substations is first introduced in offshore PFS installations. Detailed configuration and its power supply continuity benefit will be discussed. Finally, major cost reduction measures such as unman and digitalization design of 220kV PFS substation are summarized, with lessons learned in a successful development of extensive on-stream oil fields electrification transformation. This electrification transformation is expected to reduce about a total 2.52 million tons of CO2 and 0.067 million tons of NOx emissions, save 2.17 billion cubic meters of fuel gas and 1.13 million tons of standard coals. In September 2021, QHD32-6 and CFD11-1 offshore oil fields have been completed the transformation and back into production. Although on account of a total 132km submarine cables and 200MW power demand, high voltage D.C. is traditionally the first choice, this paper demonstrates high voltage A.C. can be flexibly utilized for long distance large power demand by careful design. While for many upcoming offshore projects, PFS solutions have become attractive in an effort to reduce environmental footprint, this paper presents an on-stream offshore oil fields PFS transformation, extra considerations need to be addressed. The high-speed transfer solution is first used in PFS engineering that can limit a power switching time to milliseconds, exploring a new way to significantly improve power supply continuity with limited investment. Another new information is the unmanned and intelligent design of substations to increase asset adaptability, maintain system reliability and minimize labor costs.

Along with the global wave of urbanization, urban agglomerations with megacities as the core have become the main form of urbanization in various countries. The polarization effect around the metropolis leads to the centripetal flow of capital, labour, land and other resource elements in the surrounding small towns, which causes the shrinkage of small towns in the metropolis, such as population reduction, economic recession, idle housing and dilapidated space. The shrinkage of small towns in the metropolis has become a global issue. However, as an important spatial unit in the spectrum of urbanization that serves, connects and couples urban and rural areas, the shrinking phenomenon faced by small towns has an important influence on the healthy development of urbanization. Exploring the development path of adaptive shrinkage for small towns has become an important part of the healthy urbanization of metropolises. Based on the public data of population, land and economy in Wuhan, China from 2004 to 2014, this paper uses GIS and other spatial analysis technologies to comprehensively measure the relevant characteristics of the shrinkage of small towns. The results showed that the small towns in Wuhan are in the form of "unbalanced shrinkage" under a local growth. And the towns present a spatial pattern of "circle increasing shrinkage" around the boundary of main downtown. With a further exploration of the formation mechanism of "unbalanced shrinkage", it is found that this shrinkage pattern is caused by a combination function of various factors, such as downtown deprivation in the policies supply, centripetal delivery of social capital and reconstruction of regional division of labour network. Based on this, this paper tries to propose some response paths for small towns in metropolitan areas to adapt to the "unbalanced shrinkage". First of all, the small towns should integrate into the regional differential development pattern and strive for the institutional dividend. Secondly, the small towns should promote an industrial transformation, and then attract the market release of social capital. Thirdly, the small towns should improve the living environment and promote intensive use of land. Through these paths, we can stabilize the three-level structure system of “urban-township-village”, and ensure the healthy urbanization of metropolitan areas.

This paper examines the labor market conditions of the paid workforce in the health and elderly care industry in the People’s Republic of China (PRC). Findings indicate that the wages for elderly care workers, most of whom are women, were low, and that most of the elderly care institutions had difficulty generating sufficient revenue to cover operation costs. The growth in employment in the health and elderly care industry has lagged other sectors, limiting the supply of high-quality services for the PRC’s growing population with health and care needs.

The textile and apparel industry is a highly globalized, multi-trillion-dollar sector. Today, production networks are dominated by low-cost Asian countries with very large labor-pools, which has made it increasingly difficult for other producers around the world to compete, including those in Latin America and the Caribbean (LAC). While the region has participated in the industry, there are currently no LAC countries amongst the leading ten exporters. The COVID-19 pandemic, together with rising geopolitical tensions between the US and China, however, has disrupted this well-established business model over the past two to three years. This creates the most significant opportunity of the past decade to reconfigure the geography of the supply chain; as a small, but long-term supplier, with proximity to the worlds largest single market, Central America is well-positioned to benefit from these changes. Nonetheless, the region needs to upgrade various aspects of their GVC participation in order to become a serious contender in the reconfiguration of the industry. Key policies should focus on developing human capital through industry-specific training initiatives; intensifying investment attraction efforts; and aggressively investing in both hard and soft infrastructure to reduce barriers to trade and enhance lead time responsiveness.

The textile and apparel industry is a highly globalized, multi-trillion-dollar sector. Today, production networks are dominated by low-cost Asian countries with very large labor-pools, which has made it increasingly difficult for other producers around the world to compete, including those in Latin America and the Caribbean (LAC). While the region has participated in the industry, there are currently no LAC countries amongst the leading ten exporters. The COVID-19 pandemic, together with rising geopolitical tensions between the US and China, however, has disrupted this well-established business model over the past two to three years. This creates the most significant opportunity of the past decade to reconfigure the geography of the supply chain; as a small, but long-term supplier, with proximity to the worlds largest single market, Central America is well-positioned to benefit from these changes. Nonetheless, the region needs to upgrade various aspects of their GVC participation in order to become a serious contender in the reconfiguration of the industry. Key policies should focus on developing human capital through industry-specific training initiatives; intensifying investment attraction efforts; and aggressively investing in both hard and soft infrastructure to reduce barriers to trade and enhance lead time responsiveness.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.

Macroeconomic summary Several factors contributed to an increase in projected inflation on the forecast horizon, keeping it above the target rate. These included inflation in December that surpassed expectations (5.62%), indexation to higher inflation rates for various baskets in the consumer price index (CPI), a significant real increase in the legal minimum wage, persistent external and domestic inflationary supply shocks, and heightened exchange rate pressures. The CPI for foods was affected by the persistence of external and domestic supply shocks and was the most significant contributor to unexpectedly high inflation in the fourth quarter. Price adjustments for fuels and certain utilities can explain the acceleration in inflation for regulated items, which was more significant than anticipated. Prices in the CPI for goods excluding food and regulated items also rose more than expected. This was partly due to a smaller effect on prices from the national government’s VAT-free day than anticipated by the technical staff and more persistent external pressures, including via peso depreciation. By contrast, the CPI for services excluding food and regulated items accelerated less than expected, partly reflecting strong competition in the communications sector. This was the only major CPI basket for which prices increased below the target inflation rate. The technical staff revised its inflation forecast upward in response to certain external shocks (prices, costs, and depreciation) and domestic shocks (e.g., on meat products) that were stronger and more persistent than anticipated in the previous report. Observed inflation and a real increase in the legal minimum wage also exceeded expectations, which would boost inflation by affecting price indexation, labor costs, and inflation expectations. The technical staff now expects year-end headline inflation of 4.3% in 2022 and 3.4% in 2023; core inflation is projected to be 4.5% and 3.6%, respectively. These forecasts consider the lapse of certain price relief measures associated with the COVID-19 health emergency, which would contribute to temporarily keeping inflation above the target on the forecast horizon. It is important to note that these estimates continue to contain a significant degree of uncertainty, mainly related to the development of external and domestic supply shocks and their ultimate effects on prices. Other contributing factors include high price volatility and measurement uncertainty related to the extension of Colombia’s health emergency and tax relief measures (such as the VAT-free days) associated with the Social Investment Law (Ley de Inversión Social). The as-yet uncertain magnitude of the effects of a recent real increase in the legal minimum wage (that was high by historical standards) and high observed and expected inflation, are additional factors weighing on the overall uncertainty of the estimates in this report. The size of excess productive capacity remaining in the economy and the degree to which it is closing are also uncertain, as the evolution of the pandemic continues to represent a significant forecast risk. margin, could be less dynamic than expected. And the normalization of monetary policy in the United States could come more quickly than projected in this report, which could negatively affect international financing costs. Finally, there remains a significant degree of uncertainty related to the duration of supply chocks and the degree to which macroeconomic and political conditions could negatively affect the recovery in investment. The technical staff revised its GDP growth projection for 2022 from 4.7% to 4.3% (Graph 1.3). This revision accounts for the likelihood that a larger portion of the recent positive dynamic in private consumption would be transitory than previously expected. This estimate also contemplates less dynamic investment behavior than forecast in the previous report amid less favorable financial conditions and a highly uncertain investment environment. Third-quarter GDP growth (12.9%), which was similar to projections from the October report, and the fourth-quarter growth forecast (8.7%) reflect a positive consumption trend, which has been revised upward. This dynamic has been driven by both public and private spending. Investment growth, meanwhile, has been weaker than forecast. Available fourth-quarter data suggest that consumption spending for the period would have exceeded estimates from October, thanks to three consecutive months that included VAT-free days, a relatively low COVID-19 caseload, and mobility indicators similar to their pre-pandemic levels. By contrast, the most recently available figures on new housing developments and machinery and equipment imports suggest that investment, while continuing to rise, is growing at a slower rate than anticipated in the previous report. The trade deficit is expected to have widened, as imports would have grown at a high level and outpaced exports. Given the above, the technical staff now expects fourth-quarter economic growth of 8.7%, with overall growth for 2021 of 9.9%. Several factors should continue to contribute to output recovery in 2022, though some of these may be less significant than previously forecast. International financial conditions are expected to be less favorable, though external demand should continue to recover and terms of trade continue to increase amid higher projected oil prices. Lower unemployment rates and subsequent positive effects on household income, despite increased inflation, would also boost output recovery, as would progress in the national vaccination campaign. The technical staff expects that the conditions that have favored recent high levels of consumption would be, in large part, transitory. Consumption spending is expected to grow at a slower rate in 2022. Gross fixed capital formation (GFCF) would continue to recover, approaching its pre-pandemic level, though at a slower rate than anticipated in the previous report. This would be due to lower observed GFCF levels and the potential impact of political and fiscal uncertainty. Meanwhile, the policy interest rate would be less expansionary as the process of monetary policy normalization continues. Given the above, growth in 2022 is forecast to decelerate to 4.3% (previously 4.7%). In 2023, that figure (3.1%) is projected to converge to levels closer to the potential growth rate. In this case, excess productive capacity would be expected to tighten at a similar rate as projected in the previous report. The trade deficit would tighten more than previously projected on the forecast horizon, due to expectations of an improved export dynamic and moderation in imports. The growth forecast for 2022 considers a low basis of comparison from the first half of 2021. However, there remain significant downside risks to this forecast. The current projection does not, for example, account for any additional effects on economic activity resulting from further waves of COVID-19. High private consumption levels, which have already surpassed pre-pandemic levels by a large margin, could be less dynamic than expected. And the normalization of monetary policy in the United States could come more quickly than projected in this report, which could negatively affect international financing costs. Finally, there remains a significant degree of uncertainty related to the duration of supply chocks and the degree to which macroeconomic and political conditions could negatively affect the recovery in investment. External demand for Colombian goods and services should continue to recover amid significant global inflation pressures, high oil prices, and less favorable international financial conditions than those estimated in October. Economic activity among Colombia’s major trade partners recovered in 2021 amid countries reopening and ample international liquidity. However, that growth has been somewhat restricted by global supply chain disruptions and new outbreaks of COVID-19. The technical staff has revised its growth forecast for Colombia’s main trade partners from 6.3% to 6.9% for 2021, and from 3.4% to 3.3% for 2022; trade partner economies are expected to grow 2.6% in 2023. Colombia’s annual terms of trade increased in 2021, largely on higher oil, coffee, and coal prices. This improvement came despite increased prices for goods and services imports. The expected oil price trajectory has been revised upward, partly to supply restrictions and lagging investment in the sector that would offset reduced growth forecasts in some major economies. Elevated freight and raw materials costs and supply chain disruptions continue to affect global goods production, and have led to increases in global prices. Coupled with the recovery in global demand, this has put upward pressure on external inflation. Several emerging market economies have continued to normalize monetary policy in this context. Meanwhile, in the United States, the Federal Reserve has anticipated an end to its asset buying program. U.S. inflation in December (7.0%) was again surprisingly high and market average inflation forecasts for 2022 have increased. The Fed is expected to increase its policy rate during the first quarter of 2022, with quarterly increases anticipated over the rest of the year. For its part, Colombia’s sovereign risk premium has increased and is forecast to remain on a higher path, to levels above the 15-year-average, on the forecast horizon. This would be partly due to the effects of a less expansionary monetary policy in the United States and the accumulation of macroeconomic imbalances in Colombia. Given the above, international financial conditions are projected to be less favorable than anticipated in the October report. The increase in Colombia’s external financing costs could be more significant if upward pressures on inflation in the United States persist and monetary policy is normalized more quickly than contemplated in this report. As detailed in Section 2.3, uncertainty surrounding international financial conditions continues to be unusually high. Along with other considerations, recent concerns over the potential effects of new COVID-19 variants, the persistence of global supply chain disruptions, energy crises in certain countries, growing geopolitical tensions, and a more significant deceleration in China are all factors underlying this uncertainty. The changing macroeconomic environment toward greater inflation and unanchoring risks on inflation expectations imply a reduction in the space available for monetary policy stimulus. Recovery in domestic demand and a reduction in excess productive capacity have come in line with the technical staff’s expectations from the October report. Some upside risks to inflation have materialized, while medium-term inflation expectations have increased and are above the 3% target. Monetary policy remains expansionary. Significant global inflationary pressures and the unexpected increase in the CPI in December point to more persistent effects from recent supply shocks. Core inflation is trending upward, but remains below the 3% target. Headline and core inflation projections have increased on the forecast horizon and are above the target rate through the end of 2023. Meanwhile, the expected dynamism of domestic demand would be in line with low levels of excess productive capacity. An accumulation of macroeconomic imbalances in Colombia and the increased likelihood of a faster normalization of monetary policy in the United States would put upward pressure on sovereign risk perceptions in a more persistent manner, with implications for the exchange rate and the natural rate of interest. Persistent disruptions to international supply chains, a high real increase in the legal minimum wage, and the indexation of various baskets in the CPI to higher inflation rates could affect price expectations and push inflation above the target more persistently. These factors suggest that the space to maintain monetary stimulus has continued to diminish, though monetary policy remains expansionary. 1.2 Monetary policy decision Banco de la República’s board of directors (BDBR) in its meetings in December 2021 and January 2022 voted to continue normalizing monetary policy. The BDBR voted by a majority in these two meetings to increase the benchmark interest rate by 50 and 100 basis points, respectively, bringing the policy rate to 4.0%.