Abstract According to the National Bureau of Statistics, food prices in January rose by 1.1% year-on-year, down 1.8 percentage points from the previous month, affecting the year-on-year increase of CPI by 0.58 percentage points. At the same time that the year-on-year increase in CPI fell somewhat, the year-on-year increase in some goods and services was based on...
According to the National Bureau of Statistics, food prices in January rose by 1.1% year-on-year, down 1.8 percentage points from the previous month, affecting CPI's year-on-year growth rate by 0.58 percentage points. At the same time, the year-on-year increase in CPI declined somewhat. Some products and services continued to increase year-on-year. The prices of magazines, clothing processing services, pre-school education, parking fees and family services rose by 14.1%, 5.7%, and 5.4%, respectively. 5.2% and 4.7%. Affected by fluctuations in international oil prices and bulk raw material prices, the price of some important domestic production materials declined in January this year. The price of industrial products for petroleum processing, ferrous metal smelting and calendering, oil and natural gas, chemical raw materials and chemical products decreased by 22.7%, 11.5%, 32.9% and 6.7%, respectively, which affected the industrial producers of this month. The overall price level fell by about 0.9, 0.9, 0.5 and 0.5 percentage points, with a total impact of about 2.8 percentage points, accounting for about 65% of the total decline.
Xie Yaxuan, chief macro analyst of China Merchants Securities, believes that the food season is not prosperous. The base is only part of the reason. The key is that domestic demand is weak. The price of non-food prices is 0.3% higher than the previous year, which is significantly lower than the historical value of 0.7%. Reflects weak domestic demand. In addition, due to the sharp decline in crude oil prices, the prices of fuels for vehicles and spare parts and water, electricity and fuels showed a significant negative growth, resulting in a CPI fall of about 0.07 percentage points.
Wen Bin, chief researcher of Minsheng Bank, said that the continued negative growth of PPI indicates that the next stage of industrial production is still not optimistic. From a positive perspective, this also reflects that China's industrial structure is being optimized, and the service industry has become the industry that has contributed the most to economic growth, and its demand for industrial raw products is also declining. The CPI fell below the seasonal factor of “1†with “Spring Festival misplacementâ€, but it was mainly affected by the limited increase in food prices. Among them, the pig cycle failure has become a technical factor for the continuous decline of CPI in recent years.
Xu Gao, chief economist at Everbright Securities, believes that “the Spring Festival misplacement†can explain most of the reasons for the sharp decline in CPI in January this year. If the Spring Festival this year is the same day as last year, January 31, the results of the regression equation are used to show that the CPI will reach 1.4% in January this year. Compared with the current actual value of 0.8% in January, it can be found that the Spring Festival factor explains most of the reasons for the year-on-year decline in CPI. Xu Gao also believes that the decline in oil prices and the decline in pig prices are other factors affecting the decline in inflation figures.
Deflation pressure reflects weak domestic demand
Experts interviewed by China Securities Journal have paid close attention to the risk of deflation. It is generally believed that the risk of deflation faced by the Chinese economy has both internal and external factors, which is the result of internal and external factors.
According to Feng Ming, an analyst at GF Securities, from the perspective of CPI indicators, the current situation is “commodity contractionâ€, but it is not far from “deflationâ€. It should be noted that the price increase of service products under CPI is still relatively high; combined with PPI indicators, the current "commodity contraction" is not a general price growth slowdown, but a structural contraction. The differentiation of manufacturing prices and service prices will be a period of time in the future, which corresponds to structural changes in demand and structural changes in the labor market. In a nutshell, "the current dilemma facing the Chinese economy is ultimately a structural issue."
Wen Bin believes that the trend of CPI and PPI in January is lower than market expectations, and deflation is becoming more and more obvious. Global commodity prices are low and domestic overcapacity continues. Zhu Jianfang, chief economist of CITIC Securities, believes that although China's current CPI is still positive and does not reach the definition of “deflationâ€, various indications indicate that the total economy is slipping into a state of full deflation.
Lu Zhengwei, chief economist of Industrial Bank, said that the data showed that China's total demand was weak. "High exchange rates and high interest rates will inevitably lead to deflation. It seems that this prediction has been verified." The impact of strong exchange rates on prices is first of all to lower the price of imported products. Second, it has curbed foreign demand for domestic products, resulting in insufficient use of China's demand for international markets. Third, there is no demand in the country, but the market believes that the price of domestic products does not match its quality, thus causing more valuable domestic demand to be released to foreign markets.
Xu Gao believes that the decline in commodity prices and the weak real economy have led to a sharp rise in deflationary pressures. The decline in the price of industrial products has little to do with the Spring Festival. The main reason is that the price of bulk commodities has fallen. The decline in international oil prices has led to the decline of industrial prices in the domestic petroleum industry, which is also the main reason for the decline in PPI. On the other hand, weak domestic demand has continued to curb the price of industrial products. Deflation has become a major risk to prices.
In addition, Xie Yaxuan believes that the inflation level may go down for a long time, but the market does not need to worry too much, and there will be no deflation in the short term. Xie Yaxuan expects that the CPI for the whole year of 2015 will be 1.5%. The whole year will be inverted V-shaped, which will be affected by the hikes and the high point will be in the second quarter. Inflation will rise to 1.4% in February.
"Anti-deflation" is waiting for "pine currency"
For the next stage of monetary policy, Wen Bin believes that most countries have significant deflationary pressures. Central banks [microblogging] have adopted quantitative easing monetary policies such as interest rate cuts and exchange rate depreciation, which will improve China’s foreign needs and cross-border capital flows. Have an adverse effect. In view of China's current economic situation, monetary policy needs to maintain flexibility. The moderate monetary policy should focus on “song†in the first half of this year. The “three rates†will help the economy not slip out of the bottom line, in order to deepen reform and structural adjustment. Win time and space.
Zhu Jianfang believes that further relaxation of monetary policy is necessary, and interest rate cuts and targeted easing are both tools of choice. It is necessary to strengthen the policy of "anti-deflation". It is expected that in the next quarter of the first quarter until the beginning of the second quarter, a new round of RRR cuts will be carried out. From the point of view, the RRR cut has been advanced, and it is expected that interest rates will be cut in the first quarter. On the one hand, it is taking into account the weak domestic economy, on the other hand, it is also taking into account the impact of the US interest rate hike in the second half of the year. At the same time, the exchange rate needs to be more flexible and flexible.
The political commissar of Lu believes that the key policy to solve the deflationary pressure is to implement the depreciation of the renminbi. Foreign experience shows that countries that have implemented currency depreciation have basically achieved economic recovery. Whether it is implementing quantitative easing or lowering interest rates, the ultimate goal is currency depreciation.
Xie Yaxuan said that because the inflation level is significantly lower than expected, the market generally believes that the successive introduction of easing policies is expected to slow down deflation. The CPI's gains will fall, and the central bank's monetary policy will be more active, which will help the economy stabilize. The central bank may prefer to use directional control tools, but not limited to this, the pace and frequency of adjustment may be more positive. The downward adjustment window for the benchmark interest rate has been opened and it is expected that interest rate cuts will be possible at the end of the first quarter. Xie Yaxuan said: "The base currency gap for the whole year of 2015 is about 2 trillion yuan. There are still two or three times of RRR reduction possibilities in the future." The exchange rate depreciation will not restrict the monetary policy space. The central bank hopes that the monetary policy will be effective and the exchange rate. A balance is struck between float and free capital flow, and exchange rate fluctuations are designed to increase the effectiveness of monetary policy.
Xu Gao believes that the current monetary policy relaxation should be the most and most likely to be carried out in a way that increases credit supply. This is because the loose monetary policy of the past few months has not been transmitted to the real economy, but only the financial market is flooded, forming a capital market bubble in the context of leverage. This makes the financial market and the real economy appear to deviate significantly – the “funding difficulties†of the real economy and the “not bad money†of the financial market occur simultaneously, and the weakness of the real economy coexists with the bull market in the financial market. Capital market plus leverage has attracted the attention of regulators, which have been tightening their supervision of financing operations and umbrella trusts for more than a month. Next, the key to stabilizing economic growth is to ease the financing bottleneck of the real economy. In the context of the continued oversight of over-the-counter financing, it can only be achieved by increasing the on-balance sheet credit. The relaxation of monetary policy in the future is more likely to be done by relaxing credit. This will help stabilize the real economy, but at the same time it will cool the financial market.
Jiang Chao, chief macro analyst of Haitong Securities, said that factors such as poor economic start in January and a fall in CPI growth demanded that the central bank increase its easing. In the past, when the central bank entered the policy relaxation cycle, it often started to cut interest rates and lower the RRR to increase the supply and demand of credit. At present, the risk of deflation is much higher than in 2005, so there should be at least one more interest rate cut in the future and more than two times.
Feng Ming said that the central bank has lowered the deposit reserve ratio on February 5, but this reduction is partly due to pre-holiday seasonal factors; it is expected that there will be another 2-3 reductions during the year. This is the normal logic of monetary policy and should not be understood as a comprehensive release of water.
Infrastructure investment reveals signs of overweight
Wen Bin expects that GDP growth in the first quarter of this year may fall further to 7.2%. In the second quarter, while the active fiscal policy began to exert force, it also needed monetary policy cooperation, and each time the RRR cut and interest rate cut were taken, the central parity of the RMB against the US dollar continued to be lowered, and the flexibility of the exchange rate policy was maintained. At the same time, it is necessary to strengthen policy coordination between the "three rates" to prevent a vicious circle, because the excessive easing of monetary policy brings new risks and uncertainties to the economy.
Zhu Jianfang believes that with the global economic growth rate falling and the US dollar strengthening, the trend of low inflation and even deflation is not unique to China, but a global trend. Inflation in Europe and the United States and major emerging markets are declining, especially in the Eurozone. In 2015, due to the lag in the recovery of the service industry, the pressure on deflation has increased significantly. The sharp drop in international oil prices in the second half of 2014 has increased domestic input deflationary pressures. If the international oil price continues to remain low in 2015, it will greatly reduce the domestic price level. It is expected that China's GDP growth rate will further decline in 2015, which will inhibit the price end.
Zhu Jianfang believes that from the current economic situation at home and abroad, not only monetary policy, but also fiscal policy and investment need to be strengthened. The policy “combination boxing†is more helpful in stabilizing the growth rate of the economy by 7%. It is expected that the fiscal policy will focus on the “Belt and Roadâ€, expand the deficit, and continue to promote domestic infrastructure. In addition to traditional transportation, such as “Tiegongjiâ€, the government needs to directly invest and encourage private capital to enter the fields of food, water conservancy, eco-environment, health care, information grid, clean energy, oil and gas and mineral resources protection. Increase investment and increase investment in domestic provinces that are linked to the “Belt and Roadâ€. Since low growth is bound to bring about a slowdown in fiscal revenue growth, the “counter-cyclical†fiscal policy needs to increase the deficit to expand demand and prevent the economy from falling into a deflationary vortex. Since October 2014, the National Development and Reform Commission has intensively approved a large number of infrastructure projects. It is expected that the trend of increased capital investment in the first half of this year will be more significant.
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