“Climateflation” in China: Could Rising Temperatures Overheat the Economy?

Abstract This study examined the inflationary effects of rising temperatures by linking monthly climate variables with consumer price data for 30 large‐ and medium‐sized Chinese cities from January 2004 to December 2019. Lagged one‐period temperature had a significant positive effect on current‐month price changes. The cumulative estimates indicated that each 1 °C increase during the sample period was associated with a 0.057 percent rise in prices, implying that temperature shocks contributed to consumer price inflation. Mechanism tests showed that higher temperatures reduced output growth and raised production costs, and that greater economic policy uncertainty amplified these effects. When different temperature bins were used as explanatory variables, prices increased linearly with temperatures up to 25–30 °C, then declined at higher temperatures. Temperature effects were stronger in poorer or cooler regions. The findings suggest the need to strengthen monetary policy responses, expand mitigation efforts, and develop climate‐adaptive urban systems.