Anti Inflation Has Not Yet Been Successful, Monetary Tightening Can Not Be Soft.

Recent job security, financial stability and preventing economic slowdown seem to replace inflation as a top concern for China's policymakers. Figures released by the Statistics Bureau on Thursday also show that inflation has dropped, providing a basis for tightening monetary policy in the second half of the year. But inflation has not been successful and monetary tightening can not be soft, otherwise Vietnam and the United States are warning.

Inflation at about 7% is likely to turn into a low fever. At any time, it may turn into a high fever. Low fever will continue to drag down for a long time. China's consumer price index (CPI) increased by 7.1% in June, even though it was lower than 7.7% in May and 8.5%. in April. However, the manufacturer price index (PPI) increased by 8.8%, higher than that in May, 8.2%, indicating that inflation has been pmitted from CPI to PPI, and it may again infect CPI.

The temporary fall of CPI is only a space for Chinese policymakers to breathe. The energy gap has not yet been solved. The gap between domestic oil prices and US oil prices is still around 20%. The market generally expects that domestic oil prices will be raised again in the second half of the year, which may lead to a further rise in the overall domestic price level. Domestic grain prices are on the low side for a long time. If food prices are in line with international standards, it will also bring inflationary pressure.

Anti inflation is like chemotherapy. It is inevitable that there will be negative symptoms such as hair loss and fatigue. Now the most obvious pain is China's export and real estate industry. Textile and other labor-intensive enterprises claim that if the government fails to help, a group of enterprises will soon fall into a desperate situation. The employment of about 15 million people will be threatened. Although the housing prices haven't fallen much, real estate tycoons have already complained incessantly, while they claim to be "pig strong" who weighed 200 pounds after the Sichuan earthquake.

There is always a price to pay for retrenchment, such as sacrificing part of employment opportunities, economic growth and the interests of certain industries. In Wenzhou, Zhejiang, where China's small and medium-sized enterprises gather, 20% of the enterprises are on the verge of bankruptcy due to the credit crunch. This is both a difficult and a goal that the macro policy tightening hopes to achieve, because the adoption of this elimination can promote the integration and technological progress of enterprises. The decrease in China's trade surplus in the first half of this year is a sign that the national macro-control has played a role.

Similarly, China's real estate industry is over dispersed, and the market share of the industry's largest group is only 2%. Industry integration is good for long-term development. Ye Gong Hao long, but the dragon has come to "abandon and go, lose its soul"; just as the macroeconomic regulation and control policy is not easy to produce effect, but abandons it instead of abandoning it halfway.

Two harm takes its light.

What is more terrible about inflation and economic slowdown? The economic slowdown and the rising unemployment rate will naturally cause people's resentment. Experts from the Institute of world economics and politics of the Chinese Academy of Social Sciences point out that in the late 90s, when the economic growth was "seven or eight times" or "barely guaranteed eight", there was a huge loss of state enterprises and 28 million laid-off workers. At that time, although there were small-scale demonstrations, there was no social unrest. Instead, the Tiananmen storm in 1989 occurred under the background of "all things are expensive".

Looking at the world, the consequences of not controlling inflation as early as possible are serious. Vietnam is just trying to eat a fat person and refuse to let the economy grow step-by-step. As a result, inflation has soared to over 25%. The former Federal Reserve Chairman, Greenspan, has been playing Tai Chi.

At present, China's policymakers are at a crossroads, and there are many differences within themselves. On the one hand, the people's Bank of China advocates maintaining the rapid pace of RMB appreciation, while the Ministry of Commerce, from the perspective of export protection, hopes to slow down the appreciation of the renminbi and cooperate with some other fiscal measures to encourage exports. If the central bank succumb to domestic pressure and make the money supply rebounded more clearly, the expectation of China's inflation will once again become uncertain, and the economic growth prospects for the next one to two years will become dim.

Administrative regulation to market regulation

2008 is the most difficult year for China's economy because it is faced with the plight of high economic growth rate and high inflation pressure that has never been seen in history. Ha Ji Ming, chief economist of CICC, pointed out that in the face of new emerging problems, macroeconomic regulation and control needed a reasonable combination of policies, namely, tight monetary prevention and inflation, moderately wide fiscal anti stagflation, first suppress and then boost public finance.

In particular, the expansion of fiscal policy will be in two ways: Tax and expenditure, the reduction of personal income tax, the promotion of value-added tax, the collection of resource tax, and the further increase of infrastructure, social security and agricultural expenditure. These measures can not only cushion the economic downturn but also facilitate economic pformation.

Ba Shu song, deputy director of the Financial Research Institute of the State Council Development Research Center, said that in the short term, it is not advisable to relax monetary policy in a hurry, but more vigorous fiscal policies need to be implemented, including reducing taxes, increasing subsidies to low-income groups, and promoting and supporting technological progress of enterprises.

China's local governments and enterprises have become accustomed to higher growth rates, and it is difficult to form a consensus on controlling inflation in the short term. But if the monetary policy is loosened quickly due to the fall in the initial growth rate, it may be a good time to control inflation. To control inflation as if taking antibiotics, we must insist on taking a course of treatment. Otherwise, it is not only easy to rebound, but also will produce resistance in the long run. If we do not insist on tight monetary policy, the policy will not be overcome, and China's monetary policy will lose credibility.