China's Future Rebound In Inflation Is Still Very Likely.

In the face of CPI's rise to 2%, academia's views have been highly unified: deflation is not inflation.

But this is the 42 month after the negative growth of PPI, and is it too late? It is too late, of course.

As early as May 6, 2013, I published a column in China Economic Weekly, entitled "China deflation".

This has prompted many times that if deflation is not timely, the possibility of deflation in China is very great.

However, we heard the voice of authoritative departments and big mouth scholars at that time: the possibility of China's future inflation rebound is still very large.

Is deflation a crisis? Of course.

It has put China's economic policy in a more dangerous "dilemma".

Deflation is, in any case, a monetary issue, and there must be monetary expansion in any case.

But can it work? It's dangerous.

Because expansion of the currency is bound to lead to currency depreciation, especially when the Federal Reserve will raise interest rates, the expansion of RMB policy will surely increase the rate of RMB depreciation, which will inevitably trigger a concentrated selling of RMB, which will easily lead to a vicious circle of Chinese economy. The faster the depreciation rate, the more serious the selling of RMB, the heavier the external debt burden of Chinese enterprises, and even forcing those heavily indebted enterprises to go bankrupt.

In China, what kind of enterprises have the ability to borrow foreign debts? Of course, large state-owned enterprises. What will happen if they fail? And the large fluctuation of exchange rate will definitely reduce China's foreign trade orders.

Because the exchange rate is unstable, no one dares to place an order.

Of course, the current deflation is mainly imported deflation, but there is no endogenous deflation? Of course, because China's core CPI has fallen below 1%.

In 2010, we said: in the face of imported inflation, China should be "shouldered" rather than "resist".

What does it mean? China should not adopt a tight monetary policy to "fight" because "confrontation is useless". China's monetary contraction will not inhibit the "big drain" of the US, but suppress China's domestic demand for the economy, and deteriorate the living environment of the Chinese real economy.

How to do that? Carry on the neutral monetary policy, the fiscal policy of residents' income subsidy, and moderate price control, and ensure that

Active, private capital vitality is abundant, the temporary difficulty "carries" the past.

Now can we also "carry"?

I don't think so.

Because more than 10% of the real lending rate will crush many businesses.

Fortunately, mankind is forgetful, otherwise we should know now: what kind of wrong policy has caused China's economic domestic demand to become so exhausted.

Of course, it also includes why the stock market is extremely weak and difficult to return. The two mindset entangles me.

One is, forget it. It's no use saying anything now. Think about the way to deal with it. The other is that our senior executives do not seem to realize where the problem is, and the future is likely to repeat the mistakes of the past.

Is that right? "

Is this normal? If the RMB exchange rate is stable, then is China's monetary policy tied up? Then how can we treat deflation? We should think about why a round of financial investment will be abolished once and for all. At the same time, the driving force of civil initiative economic growth is becoming increasingly weak. I can say with certainty that this is precisely the "domestic demand depression" caused by the wrong monetary policy.

Is it not? Is the financing cost of Chinese enterprises very high? Now that the benchmark lending rate is 4.55% (nominal interest rate), if we take into account the newly released PPI data, a negative increase of 5.9%, then the actual lending benchmark interest rate of enterprises is higher than 10.45%.

Frightening? But that's the truth.

How can China's downward pressure on the economy be so high? Therefore, it is reasonable to say that China must implement the loose monetary policy as soon as possible, but we recognize the stability of the RMB exchange rate.

If the RMB exchange rate can not be depreciated, how will the currency be loose? How can the currency be loose? How can we manage deflation? Of course, we know that this is the current real problem. Why do we always emphasize that we should not deflate the Chinese economy to deflation because deflation is more difficult than inflation?

However, some people do not recognize this account.

Now, those stubborn "monetarist" tell me: if we can not relax the currency and maintain exchange rate stability, we can heal China's deflation.

When it comes to easing

Immediately someone jumped out to say "big water", which means that "big water will have inflation."

This is strange.

First, is loose money necessarily equivalent to "unrestrained large drain"? Second, what is now suppressed is deflation. Why not use inflation? Third, why do you not risk deflation when you tighten money? Why should China bear the deflation crisis? China's economy should die. Is this your "subtext"? Here, I can tell you responsibly: the worst part of China's economic environment is that every day people expect to destroy China's economy. The biggest risk of China's economy is that people are misleading China's economic policy every day.

Therefore, the biggest risk of China's economy and finance is the risk of "too many bad people".