People's Bank of China: There is no foundation for long-term deflation or inflation in China
2023-04-21
Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, stated at the People's Bank of China's first quarter 2023 press conference on the 20th that the rapid growth of monetary credit coexists with a decline in prices, which is essentially affected by time delays. China does not have a foundation for long-term deflation or inflation. Zou Lan pointed out that under the strong support of a package of policies to stabilize the economy, domestic production continues to accelerate recovery, logistics are smooth and guaranteed, and supply capacity is strong; But at the same time, the recovery of demand is slow, and it takes time for consumer willingness, especially for bulk consumer demand, to recover. The rapid growth of currency and credit coexists with a decline in prices, which is essentially influenced by time delays. The prudent monetary policy focuses on exerting force from the supply side. Since last year, the support for stable growth has continued to increase, and the supply side has achieved rapid results. However, there is a process of transmitting the effects of production, distribution, circulation, consumption, and other links in the real economy, and there is a time lag on the demand side. Overall, financial data is ahead of economic data, reflecting the mismatch between supply and demand recovery. Zou Lan analyzed that the term "deflation" in society should be viewed reasonably. Deflation generally has the characteristics of sustained negative growth in price levels and continuous decline in money supply, and is often accompanied by economic recession. At present, China's prices are still rising moderately, the scale of broad money (M2) and social financing is growing relatively fast, and the economic operation continues to improve, which is obviously different from deflation. With the further effect of financial support, consumer demand is expected to further recover, the price increase in the second half of the year may gradually return to the average level of previous years, and the annual consumer price index index shows a U-shaped trend. In the medium to long term, China's overall economic supply and demand are basically balanced, monetary conditions are reasonable and moderate, residents' expectations are stable, and there is no foundation for long-term deflation or inflation. Zou Lan stated that in the next stage, a prudent monetary policy will be precise and effective, taking into account the balance of stable growth, employment, and prices. We will adhere to a prudent orientation, maintain a moderate total amount and a stable pace, create a good monetary environment, better play the decisive role of the market in financial resource allocation, improve resource allocation efficiency, serve the real economy, and promote the enhancement of endogenous economic growth momentum. Give full play to the guiding role of structural monetary policy tools, and tilt more financial resources towards key areas and weak links such as private small and micro enterprises, technological innovation, and green development. Continue to support the stable supply and price of food, energy, and other civilian and biological resources, pay attention to the possible impact of factors such as labor market supply and demand, and overseas high inflation transmission, and maintain basic price stability. (New News Agency)
Edit：Hou Wenzhe Responsible editor：WeiZe
Source：guangming dairy
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