To adhere to the “based on the current and long, comprehensive facilities strategy, focusing on governance, protect the livelihood of the people, stabilizing expectations” principle, based on economic and legal means supplemented by necessary administrative means, to comprehensively strengthen the work of the price control regulation, to maintain overall price level basically stable. To stabilize the general price level in a more prominent position.

Visible anti-inflation a top priority. In the anti-inflation process, in addition to the amount of money and price tools to maintain the frequency and intensity of wait and see, but must be on the administrative control of the intensity and time to maintain a high degree of attention. This risk as follows: When the CPI down from high, the market may have a misconception that inflation worries. If this is true because of the increase in supply and demand caused by the decline in CPI down, this feeling is naturally right. Can be strong if it is under the control of the government’s demand to stop temporarily, but the supply does not increase, deregulation is bound to make inflation rebound in the next round will be more stringent controls.

However, price controls will inhibit the downstream production continued to expand. The current price control is also limited to the areas of livelihood, if inflation does not ease, then the control will continue to expand into the production areas. The biggest problem is the price control signal disturbance makes the market, producers are not in a signal to increase supply, production will be reduced. If the supply can not be any substantial improvement, inflation will come down, but the expression different from the original, dominant and recessive inflation will translate into inflation. 30 years of planned economy in China has proved the long-term invalidity of the control, but only to enhance the market to ensure supply.

The way the market economy, the impact of the planned economy is often the phenomenon, not a trend reversion system, but it can also disturb the economy running.

Next year, inflation is still a large

No matter when and where inflation is a monetary phenomenon. To control inflation, just to control the money supply. Friedman’s research shows that, from the money supply expansion to delay its greatest impact of inflation, the M1, the average was 20 months; for M2, the average of 23 months. Now economists believe the impact on output of monetary stimulus will appear in 6-9 months, while inflation appears in 12-18 months.

The inflation is mainly caused by super sent money. Since the end of 2008 the money supply in China has been extraordinary traction gaoya CPI climbed from the bottom. Although the M2 growth rate year on year in November 2009 has already peaked and began falling, liquidity is tightening the faucet, but the impact of money supply on inflation lags.

M2 and the CPI in accordance with the empirical relationship between, there are two quarter CPI in China about ascribed process. Therefore, China is now the case, however, such a huge amount of money stock remain in the economy, at any time can lead to serious inflation. Because the stock of money can not quickly be overcome, so simply by raising interest rates can not be solved by means of the government’s administrative control is so to the force.

Taking into account the hikes, the lagged effect of monetary super-fat, increased production costs, international commodity prices and other factors, CPI is expected to reach 4.1% next year or so, the high point of the first quarter, after quarter by quarter reduced. Price control has risen since the central focus of the work, the inflation rate next year will be down in the second half.

Policy tightening may accelerate the increase

CPI in November this year, more than 5% of the cordon, and hot money inflows have slowed down over the previous month or the case of interest rate time has come to the People’s Bank of China in the 10 selected once again raise the reserve ratio by 0.5 percentage points, still is an expedient of tightening policy, that the decision-making confidence for economic growth, real tight for the existence of hesitation.

Looking first quarter of 2011, the Forced tightening mechanism will allow to speed up and increase. Interest rates rather than the reserve ratio is substantial tightening of monetary policy. Interest rate channel has been opened, only a matter of time before raising interest rates again.

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