Chinese inflation may be restructured for five years of macroeconomic policy

The inflation problem is a key factor threatening Asian economic growth and financial market volatility. In the future, China's inflation rate will run at around 5% or even higher for a long time. This cycle is about five years. All policies should be based on the improvement of inflation expectations. The Asian Development Bank released the Asian Economic Monitoring Report on July 28. The inflation problem is a key factor threatening Asian economic growth and financial market volatility. The first semi-annual report of the “Twelfth Five-Year Plan” handed over by the Chinese economy on July 13 also warned of this risk. The combination of GDP and CPI “9.6%+5.4%” in the first half of the year made the market hard landing for the Chinese economy. Concerns eased, but concerns about inflation have not diminished. One view of the mainstream academic community is that this round of inflation has been caused by the negative effects of cost-driven and excessive money injection in the previous stimulus plan. The complexity of inflation has made inflation a long-term pressure. Chen Xing, Asia's chief economist at BNP Paribas Securities, said in an interview with the "Financial Weekly" that long-term inflation will lead to currency depreciation, which will lead to the withdrawal of foreign capital, severely hit the Chinese capital market, and will have a strong impact on the entire social economy. Cross-impact The latest calculations of CPI's trend of CPI show that the CPI growth rate in July is expected to be 6.0%~6.3%, and the CPI will remain at a high level in the third quarter, with an average of 5.5% or more and 4.5% in the fourth quarter. Citi China revised its forecast for the full-year inflation rate from 5% to 5.4%, which is above the policy target of 4% to 5%. According to Liu Yuanchun, deputy dean of the School of Economics of Renmin University of China, China’s inflation in 2011 will show a trend of “before high and then low”. In terms of international food prices, in June 2011, the FAO Food Price Index averaged 234 points, up 1% from May and 39% higher than June 2010. Since the beginning of this year, the FAO Food Price Index has remained above 231 points and remains at a high level. Another high-profile international factor is the possibility of the US launching QE3. Following Federal Reserve Chairman Ben Bernanke said on July 13 that "QE3 is one of the options that the Fed must retain", the recent debt ceiling negotiations between the two parties in the US Congress have once again triggered market concerns about the dollar's proliferation. Liu Yuanchun believes that the importance of the US to stimulate the economy is higher than the importance of anti-inflation. It is expected that the Fed's monetary policy in the second half of this year will continue to maintain quantitative easing. The macroeconomic policy of the US economy will have a basic situation of fiscal austerity and overall monetary easing to maintain a slow economic recovery. But the recovery in the second half of the year may cause the Fed to raise interest rates slightly before the end of the year. The weaker trend of the US dollar continues, and the prices of commodities and agricultural products will remain high, which means that the global economy will face continued more severe inflation risks. For emerging economies that have been stung by inflationary swords, it is undoubtedly worse. "If QE3 is launched, it will bring greater inflationary pressure to emerging market countries, and China's price control task will be even more difficult." Qu Hongbin, chief economist of HSBC Greater China, told the "Financial Weekly" reporter. In the context of ample liquidity, the rigid demand in China's urbanization process and the procyclical characteristics of commodity prices are further amplified in the context of the lack of pricing power of domestic firms. The price of bulk commodities imported by China is much higher than that of the international market. China Customs announced the value of imports of major commodities. In the first five months, the import volume of iron ore and concentrates increased by 8.1% year-on-year, but the amount increased by 59.6%; the amount of crude oil increased by 11.3%, but the amount increased by 45.9%. The number of unwrought copper and copper imports fell by 25.3%, but the amount fell only 4.4%. In its World Energy Statistics Yearbook, BP said that in 2010 China surpassed the US to become the world's largest energy consumer. China's energy consumption accounted for 20.3% of the world's total, surpassing the US's 19%. In order to break the monopoly of resources, the Chinese government levy a resource tax to promote the return of factor prices and other factors will also promote long-term inflation. Since June 1st, 2010, Xinjiang has taken the lead in implementing the resource tax reform. This year, the oil and gas resource tax rate is expected to increase from 5% to 10% at the time of the pilot, but the inflation pressure is suspended. If the international oil price is 100 US dollars and the resource tax rate is 10%, the resource tax per ton of crude oil can be as high as 500 yuan. Once implemented, these measures will, in a marginal sense, prompt the PPI to further promote the rise of CPI. In addition, the demographic changes in the sixth census have also attracted the attention of many economists. Cao Yuanzheng, chief economist of Bank of China, said that the sixth national census data is crucial for judging the future economic drivers of China. . The current data confirms that China has touched at least the Lewis turning point and the demographic dividend window is about to close. The results of the census show that China currently accounts for 16.60% of the population aged 0-14; the population aged 60 and over accounted for 13.26%, of which the population aged 65 and over accounted for 8.87%. Compared with the fifth national census in 2000, the proportion of the population aged 0-14 decreased by 6.29 percentage points, the proportion of the population aged 60 and over increased by 2.93 percentage points, and the proportion of the population aged 65 and over increased by 1.91 percentage points. In Chen Xingdong's view, the rise in labor costs and the rise in land, resources, and energy prices will cross each other and will become a medium- and long-term factor driving price increases through the “salary-price spiral” mechanism. Growthism If short-term inflationary pressures can be alleviated by tightening the currency, the current market is more worried that China's inflation is facing a long-term risk. Liu Yuanchun believes that its roots lie in the development model of growthism. He pointed out that China's long-term pursuit of rapid economic growth has shown obvious "growth dependence" and "investment hunger." The high growth and high investment brought about by this growth model are likely to lead to resource shortages and overheating in the economy, which will lead to demand-driven inflation. In addition, the macro-control system with growth as the primary goal injects a lot of liquidity into the economy, which further exacerbates inflationary pressures. In 2008, the Chinese government introduced a 4 trillion economic stimulus plan, and the total investment in new residential and infrastructure projects reached 325 million yuan. Many of the projects under construction in this stimulus plan still need to invest a large amount of follow-up funds today. From January to May 2011, the total investment of the construction project is 422.76 billion yuan, a year-on-year increase of 16.5%. In addition, a new round of large-scale government investment expansion plan in 2011 has not stopped, such as the construction of 10 million affordable housing; the Ministry of Railways has determined that the capital construction investment is 600 billion yuan; the “Twelfth Five-Year Plan” determines the investment of 100,000 in the next five years. Billion to develop seven strategic emerging industries; in 2011, the No. 1 Document of the Central Committee of the Communist Party of China planned 10 years of “4 trillion” investment in agricultural infrastructure. At the same time, information from the Department of Comprehensive Planning of the Ministry of Transport shows that during the “Twelfth Five-Year Plan” period, the total investment in transportation infrastructure construction in the country was about 6.2 trillion yuan, a slight increase from the total investment during the “11th Five-Year Plan” period. During the “Eleventh Five-Year Plan” period, in order to achieve the goal of anti-crisis and growth, the country’s capital construction investment was about 4.7 trillion yuan, 2.5 times that of the “10th Five-Year Plan” period. Some analysts believe that the above-mentioned more active fiscal policy has led to the impulse of infrastructure investment at all levels of government under the current system, and the credit scale of commercial banks and local government financing remain high. In the view of Liu Yuhui, director of the China Center for Economic Evaluation of the Chinese Academy of Social Sciences, the government-led economy model is an inflation-type economy. Monetary policy can be revised and mitigated in the short term, but there will be new inflation formation over time. Liu Yuhui said that the problem brought by the government-led investment-oriented economy is that resource mismatch is very serious. If the investment efficiency is low according to the return rate of real projects, this will cause the supply side to deteriorate and eventually evolve into the future. Inflationary pressure. He said that when the government builds a large number of things that are not economically viable, the debt cannot be repaid and utilized by the efficiency of the built public facilities. The way the government repays the loans is nothing more than tax increases. The tax increase increases the cost of the supply side. , raising the price. When the tax burden still fails to solve the problem, it creates a currency risk. By printing money to dilute the debt, many problems are two sides of a coin. "Foreign countries are the market-leading resource allocation. They are taking the domestic demand-oriented economy with consumption and national wealth growth. Our government needs an exogenous force to constantly stimulate the economy through fiscal and monetary policies, which has caused many problems." Say. There is no time for reform. He Zhicheng, a senior commissioner of the Agricultural Bank's major client department, pointed out that China's inflation rate will run at around 5% or even higher in the future. This cycle is about five years. To cope with the long-term inflation, there must be clear expectations for high inflation. The policy should be based on the improvement of inflation expectations. Inflation expectations have risen, and negative interest rates have been difficult to change because China’s state-owned banks have invested large amounts of medium and long-term loans, mostly for infrastructure and capital construction loans, and cannot afford high interest rates. The era of negative interest rates is also a long-term process. "Don't expect the deposit rate to be higher than inflation. This expectation is also unrealistic. To raise the deposit rate, it is necessary to raise the loan interest rate. The deposit will increase to 5, and the loan will mention about 10. So 50% of the state-owned enterprises will go bankrupt." He Zhicheng said. From the perspective of investors, the proportion of participating in PE may be higher and higher. After all, this is a long-term investment, and the return is relatively stable. In addition, the superior resources will be concentrated to state-owned enterprises, because state-owned enterprises have better resources and can obtain funds at lower prices. These are undoubtedly extremely unfavorable to the development of private capital. \ China Venture Principal Analyst Li Weidong believes that in the case of inflation, there are unique technologies or business models that can benefit the high value-added industries that meet the rigid needs of users, while some are more traditional or rely on resources and industrial policies. Industry, future operations may be more difficult. The view of A-share professional investors is even more pessimistic. Yang Yang believes that short-term inflation will temporarily benefit some industries. At present, investors tend to prefer consumer stocks, but if inflation continues, all investors in the stock market will lose. Heavy, all industries will be damaged. Yang Lan pointed out that inflation means the rise of product prices, and this rise is caused by low value-added enterprises can not rely on their own technological progress to reduce costs. If inflation is allowed to continue, companies will continue to lose the power of scientific research and innovation, relying on price increases to resolve costs, and ultimately cause huge losses when prices cannot continue to rise. "A company, a country, if it loses the power of scientific research and innovation, it will fall into a long-term recession. Therefore, inflation is as fierce as it is," Yang said. Some analysts believe that Chinese enterprises generally lack innovation ability and industrial upgrading is difficult, so they cannot alleviate the pressure brought by domestic inflation through “going out”. Even Western multinationals with technological advantages will choose to divest because the cost advantage of operating in China is eroded by inflation. Inflation will likely make China lose the two major economic development drivers of exports and foreign investment. Some experts analyze inflation today from a broader perspective. "So far, China's inflation rate is not terrible in terms of numbers. What is terrible is that such inflation is intertwined with the sharpening of the contradiction between income distribution and the spread of corruption, which is enough to threaten the stability of the regime and society." Gao Peiyong, director of the Institute of Finance and Trade Economics of the Academy of Social Sciences, pointed out. Therefore, Liu Yuhui pointed out that China needs to accelerate the reform of the supply side, that is, to change the mode of economic growth, fundamentally control inflation, such as reforming the system of government-led economy, correcting the distortion of the price system, and also allocating resources and markets, and reducing taxes. Cultivate the middle class and increase the fairness of society. There is no time window for reform. "Any economy can be reformed at any time. If we follow the model of government and party documents, we must establish a market supply and demand orientation, and the market plays a fundamental role in resource allocation." Liu Yuhui said that for the moment, China’s Monetary policy has no more choices, and it is necessary to achieve a positive real interest rate as soon as possible. This is the primary goal. The longer this drags, the greater the loss, and the pressure of “expansion” is hard to come down. The adjustment of interest rates will change the monetary conditions, the monetary conditions determine the price of assets, and the price of assets substantially determines the tightness of credit conditions. Governments and state-owned enterprises are the most sensitive groups for interest rates. When monetary conditions are tightened, asset prices are declining. Even without the control of credit lines, the constraints on government investment impulses are substantial. In Liu Yuhui's view, it is necessary to further strengthen the opening of private capital, stimulate innovation and value growth in the private sector, increase employment, and increase the proportion of household income in national income. Letting wealth return to the family as soon as possible from the government and enterprises is the key to China's transition from an investment-based economy to a consumer-oriented economy.

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