SCIO briefing on maintaining financial market stability during COVID-19 epidemic
0 Comment(s)
Print
E-mail SCIO, March 25, 2020
China Global Television Network:
I have a question for Vice Governor Chen. China's consumer price index (CPI) has been rising steadily since the second half of last year, and the figure released in February was relatively high. What is the central bank's forecast for the CPI's future trend, and how will the monetary policy strike a balance between ensuring stable growth and controlling inflation?
Chen Yulu:
The Law of the People's Republic of China on the People's Bank of China stipulates that the ultimate goal of China's monetary policy is to maintain the stability of the renmimbi, and hence stimulate economic growth. The priority of our monetary policy is therefore stabilizing our currency. This means both keeping domestic prices stable and maintaining a generally stable exchange rate on a reasonable and balanced level. The price issue concerns every aspect of people's life. The People's Bank of China always pays great attention to the price in making and implementing policies. Last year, China's CPI rose by 2.9 percent year-on-year, driven primarily by structural factors that we all know — such as the rise in prices of pork and other foods due to a short supply. As various government departments rolled out policies to increase supplies and stabilize prices and guide market expectations, the inflation expectations of 2019 were stable, and free of diffusion.
You mentioned that the CPI grew by 5.3 percent year-on-year in the first two months of 2020. This increase was attributed to the structural factors I have just mentioned, as well as the impact of the epidemic on supplies. It is therefore both a structural and periodical increase. It can be predicted that the impact of the epidemic on supplies and inflation will remain for a short period of time. But as we make steady progress in disease control, and restart economic activities in an orderly manner, domestic production will catch up, and commodity supplies increase. We will see the general price trend gradually improve, and predict a steady decline in the second, third and fourth quarters.
Whether prices will stabilize is determined by the fundamentals of the economy. China's macro economy is operating smoothly, with aggregate demand and aggregate supply at a basic equilibrium. There is, therefore, no condition for protracted inflation or deflation. In 2020, we will put more emphasis on moderate flexibility of our prudent monetary policy, and introduce relevant policies with the appropriate intensity and priorities and at the right pace according to the evolution of the epidemic. We will also see that increases in M2 money supply and aggregate financing will be largely in keeping with nominal GDP growth. In this situation, we must both keep prices generally stable, and prevent the dual-impact of credit tightening and downward pressure on the economy, so that we can strike a balance between stabilizing growth, preventing risks and controlling inflation. Thank you.
Go to Forum >>0 Comment(s)