[ad_1]
[5 ° de Reuters de Hong Kong BREAKINGVIEWS]- A report written by a Chinese economist is getting on the nerves of the government. A report by renowned economist Ren Zeping, titled “Stagflation is coming”, exploded on the country’s social media as soon as it was published on the 1st. An economic plan is scheduled to be announced in the National People’s Congress (APN = National Assembly) that began on the 5th, but the reaction to the report reveals the challenges facing economic policy.
Ren has experience as an economist in the government research department. The number of followers increased as it accurately predicted the bull market for Chinese stocks in 2014-15 and suggested a subsequent collapse in advance. Some of the people who read this report recalled 2010. At the time, there was a clear gap between consumer price inflation and a slowdown in gross domestic product (GDP) growth, which was not satisfied with the general public. .
It may seem strange that the Chinese are concerned about stagflation right now. Stagflation is a combination of low growth and high inflation that hit the United States in the 1970s. The Chinese government announced on the 5th that it had set a growth target of “6% or more.” Last year, I had to give up goal setting due to crown disease. Currently, consumer price inflation is almost non-existent and the consumer price index (CPI), excluding food, fell by almost 1% in January. The government’s goal for this year is a 3% increase.
However, according to a private survey, business confidence in the manufacturing industry weakened in January and February, and the service industry also fell. At the same time, Goldman Sachs estimates that world commodity prices have risen by around 20% this year. Finally, China, the world’s largest importer of crude oil, steel and copper, will be affected. Treasury bond yields have already risen amid concerns that stimulus measures will trigger global inflation.
These are all headaches for Mr. Guo Ji Qing, secretary of the Communist Party Committee of the People’s Bank of China (Central Bank). Mr. Guo has endeavored to curb excessive leverage without compromising the economic recovery. Guo is well aware that China quickly escaped the closure (city lockdown) and recession caused by the novel coronavirus outbreak, and the mood spread among the people, but it has recently subsided. At a conference this week, he said rising interest rates would be inevitable as stimulus measures and subsidies to deal with corona disease gradually come to an end. The share price fell anaerobically and bank officials explained that Guo did not suggest a formal rate hike.
Inflationary pressures may decrease if policies normalize and imported energy prices may decline if currencies rise. However, if that happens, there is still a risk that an unbalanced and incomplete economic recovery will be interrupted. On the other hand, if inflationary pressure is not controlled, it could affect asset prices, such as real estate prices in first-class cities that Guo is trying to control. China’s most agile policy makers may face a difficult dilemma.
● Background news
* The National People’s Congress will open on the 5th and Prime Minister Li Keqiang will publish a government activity report that sets the growth rate target for 2021 at 6% or more. Last year I forgot to set goals.
* Ren Zeping, who has worked in the government investigation department, published a report titled “Stagflation is coming” on his official account of the dialogue app “WeChat” on day 1. He claims that China’s business cycle is passing from a period of recovery to a period of stagflation.
* Mr. Kiyoshi Guo, head of the Insurance Administration and Supervision Committee of the Bank of China (Bancassurance), who is the secretary of the Communist Party Committee of the People’s Bank of China (Central Bank), said at a press conference on Day 2. He said he would get up. Stock prices fell in response to this report.
* Mr. Guo explained that the government is considering ways to manage capital inflows to avoid turbulence in the domestic market. Officials said they were “extremely concerned” about the risk of a bubble bursting in foreign markets. He also noted that the risk of the bubble is the biggest challenge facing the Chinese real estate sector.
(I am a columnist for “Reuters Breaking views”. This column is based on my personal opinion).
* Reuters columnists provide the content such as news, transaction prices, data and other information in this document for your personal use only and for business purposes only. The content of this document is not intended to solicit or induce investment activity and is not appropriate for use in making decisions when trading, buying or selling this content. This content does not provide any investment, tax, legal or other advice as investment advice, nor does it make any recommendation with respect to specific individual financial stocks, financial investments or financial products. Use of this document is not a substitute for investment advice from qualified investment professionals. Reuters uses reasonable efforts to ensure the reliability of the Content, but any views or opinions provided by the columnist are the views or analysis of the columnist, not the views or analysis of Reuters.
