China'S Economy Needs No Fear Of Deflation

The health index of China's economy has attracted much attention recently. Especially in the context of the current downward pressure on China's economy, the CPI (consumer price index) fell for the two consecutive month, triggering some institutional concerns about deflation in China's economy.

However, experts believe that CPI is not the only indicator of deflation, and there are still many favorable conditions for China's economy.

In the future, driven by infrastructure investment and domestic consumption, China's economy will still maintain steady and rapid growth.

As CPI fell into the "1" era in September, it reached a new low of 56 months, while PPI (producer price index) also declined for the 31 consecutive month.

The two price indices continued to be weak, and the outside world issued a warning that China's economy is facing deflation risk.

Some foreign media believe that China's domestic demand is declining and the real estate market problem is more and more serious, prompting China to unexpectedly slide towards deflation.

The ANZ bank believes that low inflation shows the risk of deflation in China's economy and reduces the forecast value of CPI in China from 2.2% to 2.3% this year to 2%.

However, in the view of Lu Zheng commissar, chief economist of Industrial Bank, prices will have at least 3 to 6 months of negative growth to be defined as deflation.

At present, China's CPI is still in positive growth, but the growth rate has slowed down.

From this perspective, China's economy has not experienced deflation.

Sun Lijian, vice president of the school of economics, Fudan University, told our reporter that China has not yet seen real deflation, but still needs to be vigilant against potential deflation risks. On the one hand, we should be vigilant against the issue of two-way deflation. Price deflation caused by deflation of real estate market, local financing platform and financial products will strike people's wealth effect and consumption ability, thereby affecting the efficiency of enterprises. On the other hand, it is the issue of imported deflation. The price of crude oil, iron ore and other commodity prices has plummeted, leading to fluctuations in the currency exchange rate of various countries, affecting the stability of China's export commodity prices.

"Judging from several aspects, there is insufficient evidence for China's economy to fall into deflation."

According to Sheng Lai Yun, a spokesman for the National Bureau of statistics, deflation generally refers to the decrease in market circulation of money, leading to a continuous decline in prices.

However, since this year, China has continued to implement a prudent monetary policy, and the volume of money circulation has maintained a relatively stable growth rate.

The main reason why CPI returned to below 2% in September was a relatively high base in the same period last year.

From the point of view of the ring ratio, CPI rose by 0.5% in September, indicating that prices are still in a state of overall stability and moderate rise.

With the advent of winter and the special conditions of some food supply and demand, the National Bureau of statistics has preliminarily judged that the possibility that CPI will maintain a moderate rise in the next few months is more likely.

According to Hua Min, director of the World Economic Research Institute of Fudan University, there are three reasons for deflation in China: first, China's CPI has not seen a downward trend, but the growth rate has slipped. This can only indicate that the current macroeconomic situation is not good. Secondly, deflation is not only a fall in prices, asset prices will also fall, but China's current housing prices and stock prices have not declined. Finally, whether the broad money supply or the total credit volume, the current scale is quite large.

Although deflation has not yet occurred in China's economy, it is very important to do well in coping and preventive measures ahead of schedule.

"According to reason, deflation can only be relaxed, but our country is faced with the risk of structural deflation, that is, the real economy is showing a shortage of money, and the virtual economy is showing a lot of money."

Sun Lijian said that if we choose to relax monetary policy across the board, we will have a reverse hedging effect on the regulatory effect of China's current financial market reform.

Therefore, we can adopt asymmetric monetary means such as mortgage loan, directional reduction and so on, which not only alleviate the deflation of the real economy, but also suppress the inflation of virtual economic assets.

In fact, the best way to prevent deflation is to maintain steady economic growth.

In the process of economic pformation, it is particularly important that consumption is gradually replacing exports and investment to stimulate economic growth.

Sun Lijian believes that the growth brought about by consumption can solve many problems caused by investment, such as environmental pollution, overcapacity, and the invisible increase of foreign exchange reserves caused by oversea exports.

"Our consumption rate is really low."

Li Keqiang, premier of the State Council, said at the executive meeting of the State Council that consumption should play an important engine role in economic growth, promote consumption expansion and upgrading, and promote economic quality and efficiency.

The key is to promote consumption in the six fields, with the aim of making the masses "able to consume, dare to consume, and willing to consume".

Pan Jiancheng, deputy director of the China Economic Monitoring Center, said that the government's efforts to stimulate consumption in these 6 aspects, including specific measures in various fields, is a long-term, sustained and gradual process. The effect will not appear immediately, but it is an essential role. Once the consumption ability of various fields has been promoted, the driving effect on economic development will be enormous.