Economic Daily Jin Guanping: Price stability is not deflation. China | Economy | Prices
Since the beginning of this year, domestic prices have remained low, sparking discussions about whether the Chinese economy is trapped in deflation.
Deflation generally has the characteristics of sustained negative growth in price levels, continuous decline in money supply, and is often accompanied by economic recession. Currently, China's macroeconomic situation is steadily recovering, and the broad money market is maintaining rapid growth. At the end of June, the supply of broad money, the stock of social financing, and various RMB loans increased by 11.3%, 9.0%, and 11.3% year-on-year, respectively, all at high levels, which is significantly different from typical deflation in history.
Since the beginning of this year, the year-on-year increase in CPI has fluctuated and fallen, and it may continue to decline in July. This is a temporary phenomenon caused by the delay in demand recovery and the base effect. The monetary conditions in our country are reasonable and moderate, and the expectations of residents are stable. With the continuous manifestation of policy effects, the supply-demand gap will be further bridged. In addition, with the gradual elimination of high base factors in the same period last year, the price increase will gradually return to a reasonable level.
In the external environment of sustained high global inflation, China maintains basic price stability, which is the result of the joint action of economic fundamentals and policy aspects.
On the one hand, China has always maintained a normal monetary policy, especially the interest rate policy range, and does not use unconventional monetary policy tools. In the process of policy regulation, not only the current effect is considered, but also the lagging impact of policies and other uncertain factors are considered, and attention is paid to cross cycle regulation and cross regional balance. The level of interest rates should match the requirements of potential economic growth and maintaining basic price stability, and there should be no strong stimulus or sudden brakes from flooding. At the same time, the significant increase in the elasticity of the RMB exchange rate has created conditions for the continuous enhancement of monetary policy autonomy. Due to the adoption of the above operational strategies, China's monetary policy has remained within a normal range in recent years, with relatively moderate interest rates, hedging against short-term economic fluctuations and creating a favorable policy environment for price stability.
On the other hand, China maintains its global leading manufacturing advantage and suppresses excessive price increases from a supply perspective. In recent years, China has combined the implementation of the strategy of expanding domestic demand with the supply side structural reform, actively implemented leverage stabilization, structural adjustment, and curbing foam, emphasized support for the real economy and scientific and technological innovation, and guided funds to "move from emptiness to reality". On this basis, a sound mechanism for ensuring supply and stabilizing prices has been established, ensuring the stable supply of energy products such as coal, oil, and electricity, as well as grains such as soybeans, corn, and wheat, and maintaining overall price stability from the supply side.
Since last year, China has introduced a package of measures to stabilize the economy, but the transmission of investment expansion to final consumption takes some time. During the epidemic, the income of Chinese residents was generally affected, and there was also a process of "supplementing" savings. According to relevant data, the supportive financial instruments introduced last year have gradually formed a physical workload, and it is expected to further increase the income of the residential sector in the future.
Therefore, although prices may experience a certain degree of decline in the short term, it does not mean that China has entered a stage of deflation. The strong manufacturing foundation and stable monetary policy in recent years have laid a medium to long-term foundation for achieving price stability.
Next, we need to make good use of the existing monetary policy space, maintain monetary conditions that match the requirements of potential economic growth and basic price stability, and balance economic growth and price stability. At the same time, we should also recognize the current problems of insufficient effective demand, focus on stabilizing market expectations, enhancing the overall economic vitality of society, improving residents' income and consumption capacity, and promoting high-quality economic growth.
