Today we are going to talk about a very serious topic, that is, low prices in the northeast are actually standard deflationary manifestations.
You may have heard that prices in the northeast are very low, eating, drinking and entertainment are very cheap, and even in some places the house price is only one or two thousand yuan per square meter. You may think this is a good thing, after all, the cost of living is low and the money is more valuable. But in fact, there is a big crisis behind this, that is, deflation.
What is deflation? Deflation is the phenomenon of a decrease in the amount of money in circulation, or a continuous decline in the overall price level. Deflation causes the currency to appreciate and prices to fall, which looks good but can actually have a serious negative impact on the economy. Why? Because deflation hits production and consumption, it leads to insufficient demand, loss or bankruptcy of businesses, rising unemployment, shrinking wealth, increased debt burdens, and even financial crises. The most famous case of deflation in history is the Great Depression of the thirties in the United States.
So why is there deflation in the Northeast? There are two main reasons: one is oversupply, and the other is sluggish demand.
Oversupply is when goods or services are produced in excess of market demand. For example, agricultural and industrial overcapacity in the northeast has led to a continuous decline in the prices of grain, coal, steel and other products. These products are not competitive enough in domestic and foreign markets and are difficult to sell. Moreover, due to backward technology, environmental protection pressure, financial difficulties and other reasons, the industrial structure of Northeast China is also difficult to adjust and transform.
Sluggish demand refers to a decrease in the willingness of consumers or investors to buy goods or services. For example, the population loss in the northeast is serious, which has led to a shrinking consumer market. Many young people and those who are able choose to go out to work or start businesses, leaving behind the elderly, the sick and low-income people. These people's spending power and consumption desire are not high, and the demand for service consumption such as education, medical care, tourism, and entertainment is even more insufficient. And because of factors such as falling prices and unstable incomes, many people are also reluctant to invest or buy a home.
Oversupply and sluggish demand interact to create a deflationary situation in the northeast. According to data from the National Bureau of Statistics6, from January to August 2023, the consumer price index (CPI) of the three northeastern provinces increased by 0.6%, 0.4% and 0.2% year-on-year, respectively, far lower than the national average of 1.2%. Among them, the CPI of Heilongjiang Province fell by 0.1% year-on-year in August, the only province in the country to show negative growth.
So, how can the Northeast get out of deflation? I think we need to start from the following aspects:
First, increase government investment to stimulate infrastructure construction and public service provision. The government can increase financial investment in the northeast region by issuing local bonds, using state financial transfer payments, and applying for support for major national projects, improve infrastructure such as transportation, energy, and communications, improve the level of public services such as education, medical care, and pension, increase employment and income, and expand domestic demand.
Second, accelerate industrial restructuring and innovative development, and improve the competitiveness and attractiveness of the northeast region. The government can promote industrial upgrading and transformation in Northeast China, develop modern service industries and strategic emerging industries with high added value, build a number of industrial clusters and brands with characteristics and advantages, and enhance the core competitiveness of Northeast China by implementing industrial support policies, optimizing the business environment, encouraging private investment, and introducing talents and technologies.
Third, strengthen the reform of population policy and social security system, stabilize and expand the consumer market in the northeast region. The government can encourage population growth and inflow in the northeast region by relaxing the birth policy, improving the household registration system, raising the minimum wage standard, and lowering the social insurance premium, so as to increase the income level and consumption power of residents, reduce residents' worries and stimulate their consumption potential.
In short, the low prices in the northeast are actually standard deflationary manifestations, the result of unbalanced and insufficient economic development. Deflation has serious harm to the economic and social development of Northeast China, and effective measures need to be taken to deal with it. I hope that through this video, everyone can have a deeper understanding of deflation and pay attention to the development issues in the northeast region. If you like this video, please like, comment and share it to let more people know about this topic. Thank you all for watching, and we'll see you in the next issue!