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Over time, we have experienced the twists and turns of economic development. Contrary to the optimistic predictions of experts in the past, the current situation can be described as unexpected.
First of all, according to official data, the latest consumer index rose by less than 10%, compared to the same period last year, although it was still affected by the epidemic, but the situation was also significantly worse than now. The optimal range of the consumer index should fluctuate between one and a half percent to three percent, while more than three percent could trigger currency depreciation, i.e. inflation. Conversely, below 1.5 percent and lasting longer, it can lead to deflation.
More worryingly, however, is that, according to official data, the balance of mainland currency exceeded $250 trillion at the end of February 2023, up more than 10% from February 2022. This sudden increase in the monetary balance triggered fears of inflation. However, the current economic situation is fraught with complexity, and deflation may follow.
There are some clear indications that this is not an unfounded concern. First of all, the mainland's export trade has not been as smooth as in previous years, and even after the epidemic is over, import and export trade has not recovered as expected. Domestic producers are stepping up production in order to compete for orders, which is likely to lead to more goods produced than needed, triggering deflation.
In addition, in the first quarter of 2023, the number of RMB deposits in the mainland significantly exceeded the number of loans. While this may indicate that residents have more money on hand, this is not the case. In recent months, residents seem to prefer saving rather than consumption, causing production in the economic market to remain at pre-pandemic levels, and despite the abundance of goods produced, residents are reluctant to buy, which has led to a sharp decline in profits for related businesses.
In order to cope with this dilemma, companies have to take measures such as price reduction or cost control. This has also led to a fall in house prices, and although this may increase the purchasing power of residents, a significant number of residents are still waiting for lower prices. Rather than significantly reducing pressure on companies, this strategy has led them to cut wages and lay off workers, increase unemployment and make the job market more difficult.
In this seemingly endless economic game, people with strong family wealth are relatively less affected, and they have enough financial resources to deal with the crisis. And the life of the moonshiners, although it may be slightly tense, does not collapse. However, the influence of the middle class is greater. They have accumulated numerous loans in banks, and the amount of loans will not decrease despite a decrease in income. This makes them feel anxious, as if the wealth they have accumulated over the years has evaporated.
These middle-class people not only have to repay various loans, but also have to deal with multiple pressures such as household expenses, children's education and pension. Once income decreases, these expenses are reduced accordingly, which is a huge burden for the whole family. However, the trend of the overall economic environment is not within our control.
We need to pay close attention to changes in the market economy and plan ahead to deal with what may happen at any time. Despite the grim reality, we must trust that the state will never stand idly by. The state has always stood behind every one of our Chinese, and no matter what challenges we encounter, we can be confident that the state will take steps to protect our interests. Please share your thoughts in the comments section and let's discuss ways and suggestions for addressing current economic challenges.
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