Price Trends: Policy Combinations

Ms. Li from Qingyuan, Guangdong Province, recently found it a lot easier on her hands. “The price of vegetables dropped a lot. I spent more than 20 bucks to buy so many dishes!” Since November, farmers’ markets and supermarkets in Qingyuan city have not only become cheaper vegetables, but also retail prices of eggs and pork have fallen. .

Ms. Lee's feelings are not individual phenomena. National Bureau of Statistics data show that in November China's CPI rose 4.2% year-on-year, down 0.2%. Before this, from August to October, the CPI increase has dropped for three consecutive months. The pressure of rising prices began to ease.

The fierce price of the fierce horse was finally arrested by the reins.

The people's attention has been swayed by the trend curve of consumer price index (CPI) that has triggered the upward adjustment of consumer prices.

At the end of 2009, CPI rose from negative to positive, and inflation expectations have risen. In 2010, price increases began to accelerate, and this momentum continued into the first half of 2011. According to data from the National Bureau of Statistics, the CPI rose by 5.5% year-on-year in May this year, reaching a new high for 34 months. It increased by 6.4% year-on-year in June and hit a new high in three years. In July, the year-on-year increase in CPI reached 6.5%.

Affected by the rising prices of international bulk commodities, coupled with domestic excess liquidity and rising costs, a variety of factors are intertwined to push up the overall price level.

The increase in CPI kept refreshing the "record" and had a direct impact on the people's lives. In particular, food prices, which are the main drivers of the rise in CPI, are even more “rising”. Food prices rose, rice prices rose, and oil prices rose. In July, the price of pork rose by 56.7% year-on-year. Some people lamented that pork has kidnapped the CPI. Food, fresh eggs, and aquatic products prices have risen sharply once again, and prices have become the subject of talks. Haishu people who hoard goods before the price increase, online shopping groups that bargain on the Internet, and the “DIY family”, who are busy with their own food and clothing, are coping with price increases.

The rise in prices not only aggravated the pressure of ordinary people's lives, but also made many companies feel "powerless". The prices of various types of resource products have continued to rise, and labor prices and capital costs have risen simultaneously. The increase in production costs erodes the profits of companies and eventually leads to the products of downstream industries.

The price issue is not only an economic issue but also a social issue that affects the overall situation. The increasingly severe price situation, with the hearts of the people, also affects the hearts of the leaders of the central leadership. Safeguarding the people’s lives, promoting steady and healthy economic development, and maintaining social stability all require the suppression of excessive price increases.

Prices are stable, people are determined, and social security is maintained.

The Party Central Committee and the State Council reviewed the situation, made decisive decisions, put stable prices as the top priority for this year's macro-control, adopted a series of policy measures, and launched a tough battle to curb excessive price increases.

Since the end of last year, a combination of policy and boxing has been intensively introduced and policies have been introduced.

The timely adjustment of monetary policy directly hits the source of price control. At the end of 2010, the central government decided to adjust this year's monetary policy from moderate to loose. In the first seven months of this year, the People's Bank of China has raised the benchmark interest rate for RMB deposits and loans three times and raised the deposit reserve ratio six times. The flexible use of various monetary policy tools has strengthened liquidity management and created monetary conditions for controlling excessive price increases.

Bank of Communications chief economist Lian Ping analysis, from the perspective of money supply, through a series of sound policies, the money supply has dropped from a very high level to a very low level, the shrinking effect of the continuous tightening of the currency price on prices is Gradually emerged.

Grain prices are stable, and prices are stable. The bumper crops provide the most basic resource guarantee and confidence support for "controlling inflation." The Party Central Committee and the State Council attach great importance to grain production. This year, we continue to increase subsidies and incentives, substantially increase and timely publish the minimum purchase price of wheat and rice, and timely allocate agricultural disaster relief funds. These policies and measures have effectively mobilized the attention of local governments. The enthusiasm of grain and farmers for farming and growing grain. In the case of frequent and frequent agro-meteorological disasters, this year achieved an “eight-fold increase” in food production.

Zhang Liqun, a researcher at the Development Research Center of the State Council, believes that from the perspective of supply, grain production has increased steadily for eight years in a row, the number of live pigs has increased significantly, the pace of construction of affordable housing has accelerated, and housing supply has increased significantly. The continuous improvement of the supply side has provided important support for price stability, coupled with technological advances and increased labor productivity to hedge against cost increases. In general, the factors supporting price stability are continuously increasing.

Heavy fist to chaos. Carrefour and Wal-Mart Supermarket scrutinized price fraud in 19 stores, investigated Unilever (China) Co., Ltd.'s price-raising information, reinforced the order of agricultural product purchases, and focused on supervising the agricultural products electronic trading market and futures market. The government has investigated and dealt with price violations, safeguarded market order, and effectively stabilized market prices and inflation expectations.

With rising prices, low- and middle-income families have been hit hardest. In order to ensure that their lives are not greatly affected, most of the provinces, regions and cities in the country have established a linkage mechanism linking social assistance and security standards with rising prices, and the government will temporarily issue price subsidies. This mechanism covers urban and rural low-income families and special care recipients. It plays a positive role in institutionally ensuring that the lives of low-income people are not "injured" due to rising prices, and has gradually improved.

Experts anticipate that as policy results continue to show, and the tail-end factor continues to subside, inflationary pressures are expected to ease over the next few months.

Adjusting prices cannot be relaxed Although price increases are tending to fall back, the complexity of the current factors that affect prices is hard to breathe.

Chen Jiagui, a member of the Chinese Academy of Social Sciences and director of the Department of Economics, believes that the rapid rise in prices has been suppressed to a certain extent, but the major factors that have caused rapid price increases have not changed significantly. The overall price level is affected not only by the supply and demand relationship but also by rising costs. Restraining inflation will remain an important task of macroeconomic regulation and control in 2012.

In general, demand-led inflation will cause more dramatic fluctuations in the short term, while cost-driven inflation will be relatively moderate and the development process will be relatively slow. At present, the factors driving the increase in costs, such as the rise in labor costs, agricultural products, and service prices, are both trending and reasonable; the promotion of resource price reforms also requires some space. Experts analyze that the current inflation has gradually evolved into a mix of demand-driven and cost-driven, and that the cost-driven factors will become more and more obvious in the future.

The price of agricultural products closely related to the trend of CPI has recently risen again after falling sharply in the previous period. According to the monitoring of the Shandong Provincial Agricultural Information Network, the wholesale price of vegetables in Shandong, the main producing area of ​​agricultural products, has risen for three consecutive weeks by the week of December 4. According to industry analysts, near the end of the year, the peak season of consumption, coupled with the influence of weather, the prices of edible agricultural products may continue to rise.

There is also great uncertainty in the external markets. The six central banks such as the Federal Reserve Bank have recently joined hands to provide liquidity to the market. In November, commodity prices fell sharply and gained support at low levels. After a large amount of liquidity has entered the market, the possibility of “returning” commodity prices is still not small. If international commodity prices remain high or even continue to rise for a long time, it will undoubtedly bring input pressure to domestic market prices.

What is even more interesting is that in recent periods, while prices have peaked and declined, economic growth is also declining. How to balance the price control and steady growth poses new challenges for the future macro-control.

Experts believe that the current external environment facing economic growth is full of uncertainties, the downside risk of the world economy is increasing, and the sovereign debt problem is continuously escalating. This will have a continuously negative impact on China’s economic growth. The complicated economic situation needs to more accurately judge the trend changes of economic trends and conduct pre-adjustment and fine-tuning in a timely manner so as to handle the relationship between controlling inflation and steady growth.

In recent days, the central bank lowered the deposit reserve ratio for the first time in three years. At the same time, it also recovered funds through active open market operations, and the volume of single-week return on capital reached a record high of nearly eight months. “One release and one receipt” confirms the fine-tuning nature of current macroeconomic policies.

Lian Ping believes that, based on the current economic growth rate has fallen back to a reasonable range, the price situation is also slowing down, under the premise of maintaining the overall tone of monetary policy, to enhance flexibility, do some fine-tuning is more appropriate, for small, micro, new Strategic enterprises should formulate appropriate policies for deregulation, and at the same time increase the targeted funds for the protection of housing and major projects under construction.

To regulate prices, the Chinese economy has hit a tough battle. The results have not come easily. While maintaining a steady and rapid economic development, we have managed to gain better management of inflation expectations. We have gained time and accumulated experience. Under the increasingly mature macro-control escort, the future pace of the Chinese economy will be more stable.