Looking at the conclusion first, the National Development and Reform Commission and the central bank gave a clear answer: impossible!
Recently, the Internet has been filled with all kinds of voices denigrating China, saying that China's economy will fall into deflation, prices will continue to fall, money supply will be insufficient, and so on. These remarks make us wonder if China will also be mired in Japanese-style deflation. Fortunately, the National Development and Reform Commission and the central bank came out in time to speak, telling us not to worry, China's economy simply cannot fall into deflation!
First, let's take a look at what deflation is. Deflation is the phenomenon of continuous falling prices while the money supply decreases and economic growth stagnates. According to the National Development and Reform Commission and the central bank, this is not currently the case in China. Although prices have indeed been running low this year, it does not mean that China will fall into deflation.
So why are there any fears that China's economy will fall into deflation? The main reason is the change in the international environment. In recent years, the global economic growth rate has slowed, trade protectionism has risen, and the impact of the epidemic have led to a weak global economic recovery. These factors may put some pressure on China's exports and manufacturing industry, which in turn will affect prices and economic growth.
However, the NDRC said that with the steady recovery of China's economy, the gradual strengthening of market confidence, and the gradual weakening of the low base effect, China's overall price level is expected to gradually recover and reach near the annual average level. In other words, the decline in prices is only a short-term phenomenon, and prices will gradually recover in the future as the economy recovers.
Zou Lan, director of the monetary policy department of the central bank, also made it clear that although the exchange rate of the renminbi against the US dollar is important, it is not the whole of the renminbi exchange rate. China operates a managed floating exchange rate system that is adjusted with reference to a basket of currencies. This means that the fluctuation of the RMB exchange rate is not only affected by the US dollar, but also by many other currencies. Therefore, we should pay more attention to the changes in the exchange rate of the renminbi against a basket of currencies.
In addition, the central bank also said that it will continue to implement prudent monetary policy in the future, strengthen counter-cyclical adjustment and policy reserves, and promote high-quality development with high-quality financial services. That is, if the economy shows signs of recession, the central bank will take measures to regulate and maintain stable economic growth.
The Ministry of Finance also released data that from January to August, 77.5% of the annual new special bond limit has been completed, 10.8 percentage points faster than the sequential progress. The bond funds mainly support municipal construction and industrial park infrastructure, social undertakings, transportation infrastructure and other key construction areas. This means that the government is actively investing in infrastructure construction, which plays an important role in driving economic growth and rising prices.
To sum up, China's economy is currently experiencing no deflation, and the National Development and Reform Commission, the central bank and the Ministry of Finance are taking active measures to maintain stable economic growth. So don't worry that China's economy will fall into the quagmire of deflation, and don't believe some eye-catching self-media articles. Everyone saves less and consumes more, and if the mainland economy is transformed into a consumption-driven economy, there will be no deflation!
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