The Risk Of Deflation Increases, And The Policy Of Macro Regulation And Control Should Be Decisively Overweight.

The price data will be released in December 2014. The market is expected to increase by CPI year-on-year, and the PPI decline may increase further.

Analysts believe that our country is facing severe deflation. We need to pay enough attention to the problems of further slowing down of demand growth, further debt pressure and even failure of monetary policy. The macro control policy should be resolutely overweight and reverse deflation expectations, especially efforts should be made to resolve excess capacity, promote market clearing as soon as possible, and implement reform measures that are conducive to raising potential growth rate as soon as possible.

From the perspective of price trend, the pressure of deflation in the future may be further increased.

In November 2014, CPI grew by 1.4% year-on-year, a 5 year low; PPI fell 2.7% year-on-year, declining for 33 consecutive months.

However, the bottom of the price signal has not yet appeared.

Judging from the situation since December 2014, the price of crude oil has driven down the price of the industrial chain as a whole, and the price of extractive industries and raw materials has also been relatively low.

Looking forward to 2015, the fluctuation period of pork and other agricultural products obviously elongated, the amplitude also narrowed significantly, the possibility of substantially pushing up CPI was smaller, and under the pressure of overcapacity, PPI was still unable to get rid of the negative growth trend in the short term.

One of the important reasons why CPI is still rising is the rigidity of labor force, and the working age population of China is beginning to decrease. Therefore, if we wait until CPI and PPI both have negative growth to identify deflation, it is likely to delay the best timing of macroeconomic regulation and control.

Enough attention should be paid to the negative effects of deflation risk.

Once deflation expectations are formed, there will be a tendency of self reinforcement, which will further inhibit the release and aggravation of demand.

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With deflation further aggravating, even if nominal interest rates are reduced to zero, the real interest rate will continue to rise, and the debt burden of enterprises will continue to increase, and the willingness to increase investment will continue to be weakened.

Once this happens, the speculative demand of currency is almost infinite. The easing of monetary policy can not stimulate the real economy, and the so-called passive situation of liquidity trap appears.

Even without such extreme circumstances, deflation will obviously lengthen the capacity cycle.

To take appropriate policy measures to deal with deflation risk, the key is to identify the "cause".

The impact of weak domestic demand is actually more critical.

Under the new normal, the potential growth rate of the economy will slow down and the demand will not be very strong, but the persistence of deflation means that the actual expenditure is already weaker than the level of output under full employment.

From the perspective of macroeconomic regulation and control, the timely regulation of demand management policy is very urgent.

For some time, the policy seems to be entangled in avoiding strong stimulus, which may be related to the current digestion period of the early stimulus policy, but the policy should undoubtedly be more effective and late.

The greater the possibility.

In terms of monetary policy, the increase of passive liquidity is not enough to support the reasonable growth of M2.

Of course, the timing of the policy may still be a choice, minimizing the devaluation pressure and capital outflow effect of loose currencies.

In terms of fiscal policy, the central government should play a more important role in the increase of capital investment, and investment in railways, environmental protection and other fields is still promising.

The key is external.

The adjustment should be carried out urgently.

The executive session of the State Council has deployed financial support for enterprises to "go out", and the relevant departments are implementing the spirit of the conference, for example, the audit procedures for overseas direct financing of domestic enterprises will be further simplified.

It should be noted that the new foreign economic strategy can not be simply interpreted as the pfer of domestic excess capacity. It should also be considered as a win-win move to pplant China's development experience to emerging market countries and enhance their economic development level.

Therefore, enterprises should also enhance their international operation ability and pform and upgrade in more intense market competition.

China's new environmental standards should be speeded up and implemented strictly, effectively eliminating backward production capacity and speeding up market clearing.