According to China Securities Journal, some experts hold the view that China is possible to contribute 65% to world economic growth this year, and its CPI may come to a turning point in the next two months.
The fluctuation of M1 (a narrow measure of the money supply) is closely related to the fluctuation of the CPI (Consumer Price Index) and PPI (Producer Price Index). In general, the continuous growth of M1 will cause the CPI and PPI to rise, which lag behind by 2-3 and 3-4 quarters, respectively. According to Lian Ping, chief economist of the Bank of Communications, as the growth rate of M1 has already reached 18 percent after 3 quarters of sustained increase, China's CPI may come to a turning point in the next two months.
Chief economist of China International Capital Corporation (CICC) Ha Jiming expressed short-term optimism about the price trends. He advised that the government can issue "economy transition bonds" to avoid inflation. The central bank can use foreign exchange reserves to purchase this type of bond, which will reduce the foreign exchange reserves and raise the level of domestic consumption.
However Jia Kang, Director of the Research Institute for Fiscal Science under the Ministry of Finance, believes that it is not prudent to launch anti-inflationary measures right now since the prices are still unstable, which do no good to stabilizing the economy. He also expressed his concerns about "Chinese-style stagflation" - prices rise to a relatively high level while its GDP sustains an 8% growth rate for a long period.
Wang Zili, Vice President of the Graduates School of the People's Bank of China, thinks that it remains to be seen whether the future economy can sustain a higher growth rate, since the marginal utility of government investment is in decline. Moreover, against the background of US dollar's ongoing decline and domestic asset price inflation, economic stagflation is likely to appear.
According to Zhang Tao, Director-general of the Financial Survey and Statistics Department of People's Bank of China, adjusting the present fiscal policy would not be an easy task.
"Although a second phase of the global financial crisis is not likely to occur in the short term, it will be impossible to return to the pre-crisis economic growth level," says Ha Jiming, "This applies equally to China. It will be hard to maintain a double-digit economic growth rate. But China's economy can still achieve healthy long-term development." Chief economist of Guotai Junan Securities Li Xunlei thinks that because of China's demographic dividend, the construction and real estate industry will continue its rapid development in the future, thus, promoting China's economic growth.
According to Huang Qifan, Executive Vice-Mayor of Chongqing City, the time is ripe to promote economic transition and implement structural adjustments from an external demand-based economy to a domestic demand-based economy. Firstly, to boost domestic demand and consumption power by raising the bank loan-deposit ratio Secondly, to enhance the upgrading of the country's industrial structure. And finally, to adjust the distribution of productive forces, from coastal areas to inland regions.
(China.org.cn by Ma Yujia June 23, 2009)
