This article is from the public number:China Economic Weekly (ID: ChinaEconomicWeekly), author: NIU Wen-new title from the chart: vision China

November 11 (Today), A shares go out of the low and low prices. As of the Shanghai and Shenzhen stock markets closed all day, the Shanghai Composite Index closed at 2909.97 points, down 54.21 points, down 1.83%; Shenzhen Component Index closed at 9680.57 points, down 214.8 points, down 2.17%; GEM index closed at 1673.13 points, down 38.09 points, The decline was 2.23%.

On Saturday (November 9th), the National Bureau of Statistics released the October 2019 National CPI(People’s Consumer Price Index) and PPI(Industrial Producer Price Index) data. In October, the CPI rose by 3.8% year-on-year, and the increase was somewhat more than expected. However, from the overall perception, the industry generally believes that large fluctuations in pork prices are the main factors for the CPI to rise more than expected. For this reason, many insiders believe that the central bank should not raise interest rates because of such price increases.

The National Bureau of Statistics data shows that from the year-on-year situation, pork prices rose by 101.3% in October, affecting CPI by about 2.43 percentage points, accounting for nearly two-thirds of the total increase in CPI. From the ring ratio, in October, compared with September, pork prices rose by 20.1%, and the increase was 0.4 percentage points, affecting the CPI growth rate by about 0.79 percentage points, accounting for nearly 90% of the total CPI.

By the above picture, we can see that before February 2019, the price of pork continued to fall and dragged down the CPI. After February, consumption began to return to normal, and pork prices began to rise, which also affected CPI. . Especially after June this year, CPI is affected by pork prices.More obvious, the increase in the chain ratio has increased, which has greatly stimulated the year-on-year increase.

The author believes that the effective way for China to drive down CPI now is to find ways to increase the supply of meat rather than tightening the currency. Theoretically, tightening the currency can only further depress the needs of the whole society, but it can not restrain people’s desire to eat meat. Therefore, suppressing “people eating meat” by tightening the currency is tantamount to “the pig is sick and the medicine is taken by people.” It is not only meaningless, but it will destroy domestic demand. However, the historical experience of “the decision of interest rate is high and low pigs” exists after all, so it is understandable that stock market investors are worried that monetary policy will be affected by pork prices.

However, this time is different. In the context of falling prices in the global market, the central bank should not use interest rates to deal with the sharp changes in short-term pork prices, but this does not mean that the central bank has innovation in operational skills.

For example, in the face of new CPI data, if the central bank does not need to respond to the tightening of the currency, then it can moderately carry out reverse repurchase operations to control the money market interest rate and avoid the excessive rise of the 7-day shibor. Market effect.

This type of operation is important for the “pre-tuning and anticipation management” of monetary policy.

A market researcher suggested that “the rise in CPI may constrain the central bank’s monetary easing.” There is nothing wrong with proposing such a point of view, and there is such a possibility. But the problem is: First, this view does not exclude the central bank from continuing to maintain a sound monetary policy, nor does it exclude measures to guide interest rate down through some policy measures and support the reduction of corporate financing costs. Second, for a long time, The central bank has always stressed the “stable monetary policy” and has not implemented easing. In addition, there are also financial media companies that link “stock market decline” and “loose currency or restricted”, which is neither scientific nor misleading.

The author believes that China’s economic downturn is very high, and internal demand is weak. At this time, it is not necessary to use the pigs to “fudge” and avoid “kidnapping” the people’s price expectations and then “kidnapping” monetary policy. At this time, the capital market needs to be sober and clear: in the unprecedented period of global industrial capital and equity capital competition, the Chinese stock market must not be scared by “pig”.

This article is from the public number:China Economic Weekly (ID: ChinaEconomicWeekly) author: NIU Wen-new