China's Inflation Governance Is Being Tested Again

On the one hand, the US debt ceiling has broken through again, bringing pressure on China's import inflation. On the one hand, the US spending cuts are dragging the global economic recovery. Whether the US debt agreement will change the priorities of China's economic policymakers is waiting all over the world.

Although the people's Bank of China said in August 1st that its attitude towards inflation is still firm.

However, some overseas media reported that due to the pressure of the economic slowdown, the domestic inflation situation may have eased up. Under the US economic two bottom worry, China's macroeconomic policy may change.

China

The growth of the world's largest economy has been low.

In the two quarter of 2011, the US GDP growth rate was only 1.3%, with an expected growth of 1.8%, lower than the first quarter growth rate of 1.9%.

The slowdown in US economic growth will not be a positive factor for China.

The United States is China's second largest trading partner, second only to the European Union.

In 2010, China exported $283 billion to the US, equivalent to 4.7% of China's GDP.

The impact of the weak US economy has begun to spread to China.

The July China purchasing managers index released on Monday showed a stagnant manufacturing industry.

In July, the official purchasing managers index decreased from 50.9 in June to 50.7, just a little higher than the 50 critical point of expansion and contraction.

HSBC's depiction of the purchasing managers' index is even more gloomy, from 50.1 to 49.3, showing the worst since March 2009.

Some domestic economists say if China's economic growth starts

The central bank pointed out in August 1st that domestic inflation expectations are still strong and the basis for stabilizing prices is not strong enough. Once the policy is loosened, there is a possibility of a rebound. In the second half of this year, we must continue to implement a sound monetary policy and maintain the necessary policy strength.

"If official data confirm that the economy is slowing down and the price pressure is easing, the anti inflation supporters will be more difficult to win in the debate with China's powerful growth growth faction.

The consequences of tightening Washington policy stance may be the relaxation of Beijing's policy. "

Some overseas media expected.

But it all depends on the latest inflation figures released by China in August 9th.

Earlier, the latest weekly report of China's Ministry of Commerce shows that pork is the main source of price pressure.

The report showed that pork prices were flat in July, while the increase in the first three weeks was only 2%, compared with 17% in the same period in June.

QE3 or arrow is in the air.

As for the expectation that inflation pressure will slow down in China, Dow Jones yesterday warned that "Uncle Sam takes away in a slowing down way, and he will send it back in a way of inflation."

Some economists have warned that

Zhang Bin, an Associate Research Fellow of the international financial research center of the Institute of world economics and politics of the Chinese Academy of Social Sciences, said: "the US policy has always been based on its own interests, rarely considering the views of other countries, and the countries in the world can only passively accept it.

The breakthrough of the debt ceiling means that global inflation will further intensify, and the depreciation of the US dollar will have a very negative impact on the stability of China's economy and the whole world. "

Zuo Xiaolei, chief economist of galaxy securities, also believes that the US move has not fundamentally solved the problem of the country's economic development in the medium to long term. This expansionary economic policy is difficult to bring the economy out of the trough. Therefore, there are big variables for China's foreign exchange reserves and the RMB exchange rate: the us further breaking the borrowing ceiling means that the US dollar will continue to face a downward trend, which will further affect China's macroeconomic situation.

In fact, the United States Congress has just reached an agreement on raising the debt ceiling. The US Treasury Department released data in August 1st that the US Treasury is expected to issue $331 billion net marketable debt between 7 and September this year. Compared with the actual issuance scale of 190 billion dollars in the second quarter, the scale of the issuance of bonds in the third quarter is expected to increase by 74.2%.

The market is anticipate that the Federal Reserve will launch a new round of monetary stimulus in the future.

Lu Lei, acting Dean of Guangdong University of Finance, believes that the third round of quantitative easing policy in the US is already in the firing line.

Raising the debt ceiling means that it is necessary to issue bonds in the short term. The main holders of these bonds should be the Fed. That means the Fed needs to put more money into the market, and the possibility of launching a new round of quantitative easing policy is very great.

One of the causes of inflation in China is imported inflation, the root of which is the second round of quantitative easing in October last year.

At that time, the US QE2 amounted to US $600 billion, which led to the rapid rise of international commodity prices, especially grain prices. Chinese producers of farm and animal products have turned to food production, and pork producers have been reduced, which has further led to the rise in pork prices.

"The QE3 that the United States may implement will bring a new round of pressure on China's inflation governance, and the macroeconomic will also be affected by a series of effects.

Raising the debt ceiling and QE3 will weaken the US dollar in the medium to long term, and our exporters will face enormous pressure due to the relative appreciation of the renminbi.

In order to curb inflation, China will adopt a tightening monetary policy, so the real economy will be doubly hit by shrinking orders and tight credit.

Lu Lei said.