It is unlikely that commodity prices will lead to inflation
Whether from the outside or from the inside, the possibility of abnormal fluctuations in the second half of the CPI is relatively small. Even if some commodity prices fluctuate to some extent, CPI is likely to remain relatively stable overall. At present, the prominent problem in China's economic life is not inflation, but how to seize the favorable window of the current CPI and PPI, and accelerate the reform of important areas and key links
This year, the macroeconomic operation of a noteworthy phenomenon is that commodities and upstream resources, raw materials, products prices rose significantly. Many people are concerned whether commodity price inflation will lead to consumption terminals, which will lead to inflation and increase the complexity of the economic situation. Combined with all aspects of the comprehensive judgment, China may face certain inflationary pressures, but control in 2017 "government work report" about 3% of the CPI growth target is possible.
PPI is a very important factor, but not an inevitable one, in the factors that cause CPI change. For example, China's PPI has sustained negative growth for 54 months, but CPI has maintained positive growth during the same period. From 2016 to September, PPI has been on the rise for 12 months. But during this period, CPI remained relatively stable, and CPI fell back at a high of 2.5% in the beginning of the year and continued for about 1.5% quarter. The underlying mechanism is that PPI is one of the causes of CPI's rise, but it does not necessarily lead to a rise in CPI. China is in a critical period of transformation and upgrading of the factors, system reform and mechanism innovation of industrial upgrading and innovation factors, the path will bring important influence on the traditional PPI transmission CPI, may even bring new forms.
At present, the overall conditions for CPI to remain stable in the short term are available.
From the external point of view, in the main factors of CPI, the weight of monetary factors is relatively large. China's implementation of prudent monetary policy has been relatively long, and in 2015 and 2016, M2 growth rate was 13.3% and 11.3% respectively. 2017 July, M2 grew by 9.2%, the growth rate down 1 percentage points, the growth rate fell for 7 consecutive months. Under a prudent monetary policy, the probability of CPI's rapid rise is modest.
From the perspective of the CPI itself, the effects of food and oil price fluctuations are greater than those of other factors. However, in the near term, food prices remained relatively stable, and food prices increased by -1.9% between 2017 and July January. This year's summer grain harvest, growth of 0.9% in 2016, so the abnormal fluctuation of grain price especially the possibility of a substantial rise is not large. Judging from the oil price, due to the high degree of dependence on China's foreign trade in oil, the impact of international oil prices on China's oil prices is greater, the possibility of a strong pullback in international oil prices is not large, and the impact on China's CPI transmission is also small.
So, whether it is from the outside or from the inside, the second half of the CPI abnormal volatility is relatively small. Even if some commodity prices fluctuate to some extent, CPI is likely to remain relatively stable overall.
At present, the main problem facing economic life is not the pressure of inflation, but how to make use of favorable price situation to accelerate the deep level reform. Over the past few years, China's CPI and PPI appear upside down, objectively leading to enormous pressure at the end of production. PPI has little influence on CPI, which is not a good phenomenon. This reflects the existence of certain "intestinal obstruction" in the price transmission mechanism". To a great extent, it is also one of the important reasons that lead to the structural contradiction of supply side. From this point of view, the prominent problem in China's economic life is not inflation, but how to seize the current favorable window of CPI and PPI, and accelerate the reform of important areas and key links. For example, to speed up the reform of state-owned enterprises' mixed ownership, push forward the reform of important production factor prices, and expand the scope of market opening, so as to form an effective price formation mechanism.