The price data released by the National Bureau of Statistics a few days ago has dropped, triggering market concerns about China’s economy. Experts said that overall, my country’s economic operation has started well, and the trend of economic recovery is clear. Low inflation does not mean deflation, and there is no systematic and sustainable deflationary pressure in my country.
The fall in prices is affected by periodic factors
“The decline in CPI growth in the first quarter was mainly affected by some periodic factors.” said Fu Linghui, spokesperson of the National Bureau of Statistics and director of the National Economic Comprehensive Statistics Department.
According to Fu Linghui’s analysis, one is seasonal factors. After the Spring Festival, as the market demand falls, the price generally falls. The second is that some food prices have fallen. As the weather gets warmer, the volume of fresh vegetables on the market has increased a lot, and the prices have both decreased month-on-month and year-on-year. At the same time, this year, the supply of live pigs is sufficient, and consumer demand has decreased after the festival, which has led to a decline in the increase in CPI. Third, energy prices fell. Fourth, the price of automobiles, especially fuel-fueled cars, has dropped. Affected by factors such as the expiration of preferential auto subsidy policies and the adjustment of emission standards, auto companies have recently cut prices and promoted aggressively.
According to Zou Lan, director of the Monetary Policy Department of the People’s Bank of China, factors such as economic fundamentals and a high base have caused prices to fall recently. On the one hand, the supply capacity is strong. With the strong support of a package of policies to stabilize the economy, domestic production has continued to accelerate its recovery, and logistics smoothness has been guaranteed. On the other hand, the recovery of demand is slow, and it will take time for consumption willingness, especially commodity consumption demand, to pick up. At the same time, the sharp rise in international oil prices and the anti-seasonal rise in domestic fresh vegetable prices in March last year also brought high-base disturbances.
“Although the recent decline in PPI has expanded and the increase in CPI has narrowed, most of the pressure facing the two will not continue.” Wang Tao, chief China economist at UBS Securities, said that the main reason for the year-on-year decline in PPI since the fourth quarter of last year is that On the one hand, global demand is sluggish, and overseas bank risks have weakened investor sentiment in March, and global commodity prices have corrected, such as oil and non-ferrous metals; on the other hand, the recovery of domestic real estate and the improvement of industrial activities are in the early stages , the driving effect on commodity demand is not yet obvious.
In the face of market concerns, Morgan Stanley China chief economist Xing Ziqiang believes that the recent drop in prices is related to the stage of economic recovery. Currently in the early stages of economic recovery, the fall in prices is in line with the time-lag characteristics of economic transmission.
Demand improvement is gradually appearing
Prices have fallen, and the market is worried that my country’s economic activities will be sluggish and may fall into deflation.
“The reference to ‘deflation’ should be treated reasonably.” Zou Lan said that deflation is generally characterized by continuous negative growth in price levels and continuous decline in money supply, and is often accompanied by economic recession. At present, my country’s prices are still rising moderately, M2 and social financing are growing relatively fast, and the economic operation continues to improve, which is clearly different from deflation.
Regarding the judgment of deflation, Zhang Wenlang, chief macro analyst of the CICC Research Department, believes that my country is currently in the early stage of economic recovery, and demand-driven inflation is picking up, rather than entering a deflationary cycle. More angles and indicators should be used to judge. For example, the growth rate of money supply hit a record high, and credit continued to improve. With the support of policies, the growth rate of corporate medium and long-term loans has continued to improve since the third quarter of last year, and has repeatedly hit new highs this year. At the same time, endogenous credit demand may have gradually recovered from the low point.
Signs of a pick-up in demand are emerging. Ming Ming, chief economist of CITIC Securities, said that the economy recovered well in the first quarter, and the pace of recovery on the demand side showed an accelerating trend.
In March, the total retail sales of social consumer goods increased by 10.6% year-on-year, 7.1 percentage points faster than that in January-February; the month-on-month increase was 0.15%. In terms of high-frequency data, as of April 9, the transaction area of commercial housing in 30 large and medium-sized cities rebounded to a new high in the same period of previous years, and the sales of passenger vehicles continued to grow.
“It can be seen that the improvement of the demand side this year is a gradual process, and it will take more time to appear. In the medium and long term, there will be no risk of deflation.” Mingming said.
No long-term deflationary or inflationary basis
“As the effect of financial support gradually emerges, consumer demand is expected to pick up further. In the second half of the year, the price increase may gradually return to the average level of previous years, and the annual CPI will show a ‘U’-shaped trend.” Zou Lan said that in the medium and long term, the total supply and demand of my country’s economy Basic balance, reasonable and moderate monetary conditions, residents’ expectations are stable, and there is no basis for long-term deflation or inflation.
Zhang Bin, deputy director of the Institute of World Economics and Politics of the Academy of Social Sciences, also said that my country’s economy will not fall into deflation. In his view, domestic consumption and investment are in the process of moderate recovery. In the first quarter, the credit growth of the whole society was relatively strong, which helped to expand the aggregate demand. Under the environment of policy support and the gradual strengthening of the endogenous power of the market, my country’s economy will not fall into a deflationary situation.
Taking into account various factors, the economy will continue to recover steadily. Wu Ge, chief economist of Changjiang Securities, believes that the real economy is about to usher in a high year-on-year growth under a low base. Aggregate demand policies and interest rates may not be loosened in the short term. In addition, it will take time to repair the balance sheet, and residents’ credit will gradually warm up.
Wang Tao predicts that with reference to the actual potential growth rate of my country’s economy, the GDP growth rate in the second quarter will rise to about 8% driven by a low base, and will remain above 5% in the second half of the year. The average CPI increase in the second half of the year will rise to more than 2.5%, and the average annual CPI increase will be around 2%.