"Drought Movement" CPI: How To Turn Macro Regulation And Control

Fang Gang, director of China reform foundation and China National Economic Research Institute

Zuo Xiaolei Bank Securities chief economist

Lian Ping, chief economist of Bank of Communications

In recent days, parts of the five provinces of Hunan, Hubei, Jiangxi, Anhui and Jiangsu in the middle and lower reaches of the Yangtze River have suffered the most serious drought since the founding of the people's Republic of China. Over 100 million mu of arable land are at the core of drought. As a traditional "land of fish and rice", 166 thousand hectares of farmland in five provinces are dead. Under such circumstances, the capital market took the opportunity to follow suit. The grain and oil hype was secretly attacked, and the food was booming.

For those already relatively high CPI Will the drought increase fuel consumption and increase the difficulty of regulation again? In the current state, is CPI expected to fall in the second half of the year? Will there be any corresponding adjustment policy in the country's policy? Drought has brought us a series of doubts. During this period, we invited Ward, Zuo Xiaolei and Lian Ping's 3 macroeconomists to visit the Southern Economic round table in Guangzhou, and discussed the trend of China's economy in the arid environment. We took the opportunity of the Ward fortune forum.

Topic background: Drought Test the domestic inflation situation

According to the data of the disaster relief Department of the Ministry of civil affairs, according to the report of the Civil Affairs Department of 5 provinces of Jiangsu, Anhui, Jiangxi, Hubei and Hunan, as of May 27th, a total of 34 million 833 thousand people suffered from drought, and the direct economic loss was 14 billion 940 million yuan. Experts believe that the continuous drought will bring severe challenges to the domestic inflation situation.

Among the components of CPI, the weight of food is currently about 30% of CPI, while vegetables account for about 20% of the weight of food. Under the background of "rising noise", the industry has told reporters that the pressure of rising food prices will increase inflationary pressure, CPI will rise or will maintain a high level.

The impact of severe drought on prices has come to a shadow. At present, the prices of vegetables in the middle and lower reaches of the Yangtze River have risen sharply, and the prices of vegetables in the northern regions have followed closely. According to the State Statistics Bureau's announcement on the average price changes of main foods in 50 cities nationwide in May 24th, the price of leafy vegetables rose the largest. Among the 7 main vegetables, the prices of leafy vegetables such as Chinese cabbage, rape and celery have risen for two consecutive weeks, up 11.9%, 16.4% and 11.6% respectively compared with the previous week.

In addition, the price of vegetables in Hubei Green Valley vegetable wholesale market is also very obvious. Among them, the wholesale price of green peppers increased by 30%, the price of Chinese cabbage increased by 60%, and the price of Chinese cabbage doubled. The same situation also occurred in Jiangsu Province, where the price of local vegetables increased considerably since May.

For grain prices Future trend Everbright Securities Research and analysis pointed out that the middle and lower reaches of the Yangtze River drought will have adverse effects on China's grain production and price this year. "Compared with industrial products, China's agricultural products are in a tight balance. In fact, since last year, China's grain prices have been in a rising cycle, and the adverse climate effects in the future may prolong the cycle time. Analysts said.

View confrontation

Topic 1 what is the impact of drought on CPI? How long will it last?

Moderator: everyone is very nervous about rising prices. Recently, the drought has caused partial increase in the prices of agricultural products. How long do you think this drought will boost fuel prices? How long will it last?

Fang Gang: drought adds uncertainty to CPI

Now the severe drought in southern China may lead to some price increases. There were some weather factors in our vegetable prices last year, and now there is a big drought, which may cause some pressure on them. CPI now there is a lot of uncertainty. I was more confident a month ago. When it comes to May and June, it can basically reach the top and decline in the second half. I think this basic trend is still there. The second half should be able to ease. But there are many uncertainties.

Zuo Xiaolei: drought is prone to psychological pressure and man-made price increases.

The current drought and floods will bring about a reduction in grain production, resulting in a difference in supply and demand and a rise in grain prices. Although agricultural experts say the impact is not great from the total grain output. But psychologically, drought is prone to such psychological pressure, and man-made price increases.

According to the Ministry of Commerce and the Ministry of agriculture monitoring data, affected by the drought in the middle and lower reaches of the Yangtze River, the price of edible agricultural products began to end slightly down in May, and returned to a slight rise. Non food prices remain high, initially judging that the CPI growth in May will be 5.5%, up from 5.4% in March, hitting a new high in the year. In the short term, the rise of CPI is difficult to fall down effectively. It is not ruled out that the CPI will rise to a new high in 6 and July.

Lian Ping: food prices are not obvious in the short term.

Drought plays an important role in promoting CPI. This is mainly due to its effects on grain and vegetables. Because early rice has been planted and late rice is still planted early, the impact on grain will not be obvious in the near future. But it has a certain impact on vegetables. The regional character of vegetables is obvious, so it has great influence on the regionally.

It depends on the development of drought. The longer the drought, the greater the impact. Especially in the three months of 5, 6 and July, prices may continue to rise. In June, the CPI index may exceed 5%.

Topic 2 CPI has reached 5.2%. What is the impact of continued soaring on life?

Moderator: CPI in April has reached 5.2%, and many scholars predict that inflation will hit a new high between the two quarter and the three quarter. Is the current price level acceptable to ordinary people?

Fang Gang: we feel that inflation contains asset bubbles.

Judging from all previous inflation, we are relatively low this time. Why do people react so strongly that everyone says everything is going up, that is, wages do not rise. A very important reason is that the prices of house and consumer goods are rising at the same time. And the house is a constant change of value in the future. As assets exist, the money of the house is unable to enter the CPI. This time, we feel that inflation is not just inflation, but also changes in asset bubbles.

Zuo Xiaolei: per capita income growth of 14%, 5%-6% inflation is still affordable.

If a series of policies including money and subsidies can be put in place, inflation can be controlled at 5% this year. 5% I think it is affordable. In the first quarter of this year, the Statistics Bureau said that the national average income increased by 14%, and the CPI in the first quarter was 5%. That is to say, you had to spend 100 yuan last year on the basic living standard. You have to spend 105 yuan on this year's inflation to ensure the standard of living last year, but the income is 114 yuan. Under the macro average level, 5% and 6% should be affordable inflation. Of course, inflation does not mean that everyone can afford it. There should be a subsidy mechanism for low-income groups.

Lian Ping: vegetable prices rose more than 5%, the pressure of the public is greater than the surface.

For the people, with the increase of vegetable prices, their actual feelings will be more obvious. When the CPI index is 5% - 6%, the rise in food prices is far greater than this. Therefore, there should be some pressure on the common people. Governments at all levels, especially those in the disaster areas, should try their best to control prices. On the one hand, they should increase the supply of vegetables, and on the other hand, reduce the cost of vegetable circulation and reduce the price of vegetables.

Topic 3 will CPI continue to go up in the second half of the year?

Moderator: you can predict, so many uncertain factors, the second half of the CPI trend will be?

Fang Gang: the trend of CPI will gradually slow down in the second half of this year.

The combination of all kinds of good and bad factors is still uncertain from the supplier side. Maybe it will linger in a relatively high position. But I am relatively optimistic about all these factors, especially in the current policy measures. I believe that the trend of CPI in the second half of this year will gradually slow down. The market does not want the economy to go too low. I think the government does not want the economy to go too low. If further downward trend is formed, of course, it will require some adjustment of the policy. We still need to have confidence in China's economy, which has great potential for growth.

Zuo Xiaolei: there will be no trend change in CPI in the short term. Monthly data change is meaningless.

Inflation will not come soon after inflation in a short period of time. If there is no financial tsunami, such unexpected events will not happen. The change of CPI should have a process. The empirical result of this cycle is generally 3 years or so. In early 2009, China voted 10 trillion. According to the empirical research, the second half of this year is exactly the time to achieve inflation expectations. There is no point in doing too many articles about monthly data changes, because CPI will not change in the short term.

Lian Ping: the current price rising period is coming to an end.

In my view, the price rise will be eased in the second half of the year after the high point is achieved. This is mainly due to the narrowing of the output gap, which indicates that the inflation pressure will be reduced. Monetary policy has obviously tightened. Since last year, the growth rate of M1 and M2 has slowed down significantly. Real estate regulation will have a downward effect on prices; the upward cycle of the current price cycle is coming to an end; and the influence of CPI's tail factor will be significantly weakened in the second half of the year. In this case, the interest rate as the most important tool for dealing with inflation has lost the reason for further improvement.

Topic 4 will monetary policy be adjusted accordingly?

Moderator: now a series of combination policy has been in force, especially in terms of liquidity, SHIBOR interest rate has reached 5%, market funds are very tense. But inflation is still not showing signs of decline. Will the monetary tightening policy in the second half of this year adjust to the current situation?

Fang Gang: interest rate policy resistance is still large, and quantity tools are still the main ones.

Judging from the current choice of policies, I believe that quantitative policy is still the main policy, that is, the reserve ratio, the issuance of central banks and the guidance of loan window. These are quantitative policies. The reserve ratio has been very high, reaching 21%. Interest rate policy should be moved to a lot of difficulties. For domestic purposes, interest rate policy has always been a lot of resistance, because many departments and many enterprises are using interest rates, when the entire stock loan interest rate rises generally, how much impact on the operation of enterprises, so it has always been relatively large resistance.

Zuo Xiaolei: we should be more aware of the rhythm and timing of the central bank.

In general, it should not be deflation. It should be sound. Now, if we want to pay the central bank to the central bank and gather together, can the central bank relax appropriately and make adjustments afterwards? I feel that the rhythm and timing of policy can not be grasped. As for the problem of small and medium enterprises loans, we need to do some analysis, because it also has some new background.

Lian Ping: the frequency of policy tools can be reduced appropriately.

Obviously, at present and for some time to come, there is no reason to go back, that is to say, to run in a relaxed direction.

At present, the world's major developed countries have continued to carry out quantitative easing policy, and international liquidity has further flooded. International commodity prices will continue to rise. China's import inflation pressure continues to increase. Domestic prices of agricultural products caused by imbalance between supply and demand of land and labor are not small. Wage and resource prices continue to increase inflationary pressure driven by cost push; increased foreign exchange earnings and liquidity expansion caused by the large number of votes in the central bank continue to challenge the target of M2 growth control.

Under such circumstances, I believe monetary policy should stick to a stable tone and continue to do something according to actual needs. But considering a series of notable changes in the recent economic and financial situation, prudent monetary policy regulation should be more flexible and prudent. The frequency of policy instruments can be reduced appropriately, and the dynamics can be weakened appropriately.