Actively Promote a Reasonable Recovery of Prices
Special Commentator for &#34;Qiushi&#34; Magazine
The issue of prices involves national finance and people's livelihoods, and is related to the overall development of the economy and society. Maintaining the overall price level within a reasonable range is not only a primary goal of macroeconomic regulation but also a prerequisite for promoting a virtuous economic cycle, and an important foundation for maintaining social stability. In recent years, China's prices have experienced a phase of low-level operation, which has received significant attention from the Party Central Committee, which has repeatedly emphasized the need to promote a reasonable recovery of prices and has made it an important consideration for strengthening and improving macroeconomic regulation. It is essential to deeply understand the Party Central Committee's assessment of the current economic situation, accurately grasp the laws of price operation and the problems faced, implement more proactive macroeconomic policies, focus on enhancing the effectiveness of macroeconomic governance, and effectively promote the gradual recovery of price levels to a reasonable range.
In real life, people are generally sensitive to rising prices, especially with widespread concerns about inflation, but often lack a comprehensive understanding of low price levels. In the impression of many, higher wages are better, while lower prices are preferable. Some people do not have a sufficient understanding of the overall price level and are accustomed to using &#34;local statistics&#34; to perceive and judge. There are also some who believe that falling prices can enhance purchasing power, reduce production costs for enterprises, improve export competitiveness, and release macroeconomic policy space, which seems to be a good thing. These views, while seemingly reasonable, actually confuse the relationship between the short term and the long term, as well as between the local and the overall. Better employment conditions and higher wage levels are closely related to price factors; one cannot only see the favorable aspects of low prices while ignoring their negative impacts. The low price operation should be viewed comprehensively and dialectically, considering both the overall situation and the structure, as well as the dynamics of policies.
First, we must dialectically view the enhancement of consumer purchasing power brought about by low prices and the weakening of consumer expectations. Sustained low prices can change people's judgments about future economic trends, creating a cyclical dilemma of &#34;low prices—weak expectations—less consumption—low profits for enterprises—low income for residents—weak expectations—less consumption—low prices.&#34; Second, we must dialectically view the reduction of enterprise costs brought about by low prices and the decline in long-term investment willingness. Low prices lead to a continuous decline in sales prices for some enterprises, which may narrow profits and increase debt repayment pressure. Coupled with rising real interest rates, financing costs will also increase, thereby suppressing investment willingness. Third, we must dialectically view the short-term enhancement of export competitiveness brought about by low prices and the export resistance caused by trade disputes and exchange rate fluctuations. Continuous low-price exports lead to excessive consumption of domestic energy resources, but do not result in increased enterprise profits; instead, they may increase pressure for currency appreciation. Over-reliance on low-cost competition will ultimately lead to a deterioration of the country's trade conditions, resulting in a decline in domestic actual consumption levels and welfare levels. Finally, we must dialectically view the expansion of macroeconomic policy space brought about by low prices and the implicit constraints on policy space. Prices that are too low can reinforce the pessimistic expectations of business entities, and if sustained for too long, may trigger related liquidity risks, leading to the ineffectiveness of conventional monetary policy. At the same time, low prices lead to a decline in nominal GDP, eroding the fiscal tax base and increasing the actual debt burden of macroeconomic sectors, thereby compressing the effective space for fiscal policy.
It is evident that prices are not necessarily better when they are lower, nor is it good for them to remain persistently low. The level at which prices should be maintained should be determined based on the actual needs of the national economy's operation
For more than 40 years since the reform and opening up, China's economic operation has faced high prices or moderate price increases. Even in some years when prices operated at low levels, the use of demand management policies could quickly promote prices back to a reasonable range. However, the current situation of low prices is more complex and is not simply a &#34;demand cold,&#34; but rather the result of multiple interwoven factors, with a backdrop of short-term disturbances from cyclical factors and complex situations brought about by deep-seated structural and institutional factors.
From the perspective of cyclical factors, since 2023, affected by the aftermath of the pandemic, the growth of residents' income in China has slowed, weakening consumption willingness and capacity. Additionally, fluctuations in global energy, metal, and mineral prices, as well as moderate declines in agricultural product prices since 2023, have had correlated and input effects on China's low price operation. From the perspective of structural factors, significant changes have occurred on both the supply and demand sides in recent years, which have had a significant impact on low price operations. On the demand side, comprehensive factors such as population size and demographic changes have suppressed consumption demand to some extent, forming a fundamental factor for low prices. On the supply side, the real estate market is undergoing deep adjustments, with some traditional industries reaching peak production; emerging industries are entering the growth or maturity stage of their life cycle, with a large influx of capital, rapid technological iteration, and intensified market competition, while terminal demand has not yet fully matched; artificial intelligence and digital technologies have improved production efficiency, reduced circulation costs, and suppressed wage growth space; the significant decrease in energy costs brought about by green transformation has lowered production and living costs, all of which have compressed the space for price increases. From the perspective of institutional factors, the degree of market-oriented allocation of some factors is not high, making it difficult for them to flow smoothly to high-efficiency sectors, and factor prices are suppressed. The price formation mechanisms in areas such as water, electricity, oil, gas, and basic livelihood goods and services are not flexible enough, hindering prices from truly reflecting supply and demand relationships. These contradictions are intertwined, determining that this round of regulation cannot simply apply past response models, and it cannot be expected that a single policy can &#34;cure all.&#34; Macroeconomic regulation requires more precise and dialectical treatment.
It should also be noted that the particularity of China's current low price operation is reflected in international comparisons, where there is a significant price temperature difference between domestic and foreign markets. In the past, we often said &#34;the world shares the same temperature,&#34; but today it is completely different. In stark contrast to China's low price operation, the United States, the Eurozone, and others are generally experiencing sustained high inflation, with price indices consistently above their policy targets. Of course, this is not accidental; behind it are significant differences between China and other major economies in macro policy choices, economic structural foundations, and trade development models. In terms of macro policy, since 2020, developed economies such as Europe and the United States have adopted &#34;helicopter money&#34; monetary policies and significantly increased fiscal spending to cope with shocks from the pandemic, laying the groundwork for inflation. In contrast, China adheres to the principle of &#34;not engaging in large-scale flooding,&#34; maintaining a relatively restrained monetary policy, not artificially creating &#34;re-inflation&#34; through excessive macroeconomic policies, and ensuring reasonable growth in money supply and social financing scale, while promoting stable economic operation and maintaining basic price stability. China's manufacturing sector is large, diverse, and stable in supply, making it easier to stabilize prices
Especially in the complex situation of rising protectionism, our country has actively expanded openness, engaged in international industrial chain and supply chain cooperation, optimized the allocation of resources in both domestic and foreign markets, effectively ensured domestic market supply, stabilized domestic prices, and created significant space for future macroeconomic regulation.
Recently, with strong signals for stabilizing prices being continuously released, the year-on-year growth rate of the core consumer price index excluding food and energy in our country has returned to above 1%, and the year-on-year growth of the broad money supply has remained above 8%. The latest statistical data released by the National Bureau of Statistics indicates that in 2025, the core consumer price index increased by 0.7% compared to the previous year, with the growth rate expanding by 0.2 percentage points from the previous year, and in December, it rose by 1.2%, maintaining a growth rate above 1% for four consecutive months. The year-on-year decline in the producer price index for industrial producers has gradually narrowed, with month-on-month increases for three consecutive months. This fully demonstrates that the recent low price operation in our country is temporary and does not conform to the economic characteristics of &#34;sustained price decline, monetary supply contraction, and economic recession,&#34; so there is no need for undue worry. From the perspective of our comprehensive strength and economic operation, we should be confident in ensuring that prices operate within a reasonable range, and thus be confident in the sustained, stable, and healthy development of our economy. The advantages of the socialist system with Chinese characteristics provide flexibility and coordination in price regulation, the advantages of a super-large-scale market are conducive to further releasing consumer demand, and the complete industrial system creates favorable conditions for supply-side adjustments. Additionally, our government's debt ratio is significantly lower than that of other major economies, and the policy interest rates are at a global median level, providing substantial policy space for promoting reasonable price recovery.
In summary, promoting a reasonable recovery of prices is a systematic project that cannot be achieved overnight. It cannot simply rely on administrative power to directly intervene in market prices, but should rely more on stabilizing employment income, promoting market competition, and streamlining price mechanisms through market-oriented, rule-of-law, and mechanized means to gradually push prices back to a reasonable range, while avoiding excessive policy adjustments that could lead to rapid price increases, affecting economic stability and livelihood security. We must unify our understanding with the Party Central Committee's judgment on the economic situation, fully utilize a series of advantages and conditions, and create a favorable environment for the reasonable recovery of the overall price level, providing good conditions for the successful start of the &#34;14th Five-Year Plan.&#34;
Adhere to the macroeconomic regulation orientation that is conducive to the reasonable recovery of the overall price level. Maintain a policy orientation of seeking progress while ensuring stability, improving quality and efficiency, leveraging the integrated effects of existing and incremental policies, increasing cross-cycle and counter-cyclical adjustments, and continuously implementing more proactive and effective macro policies. Implement a more active fiscal policy, maintain necessary fiscal deficits, total debt scale, and total expenditure, moderately expand the scale of fiscal expenditure, optimize fiscal support for commodity consumption, increase fiscal support for service consumption, and promote a close combination of investment in goods and investment in people. Implement moderately loose monetary policy, accelerate the release of basic liquidity through reserve requirement ratio cuts, interest rate reductions, and structural tools, ensuring that the growth rate of social financing scale and broad money supply matches the growth of nominal GDP. Focus on stabilizing the real estate market, implementing city-specific policies to control increments, reduce inventory, and optimize supply, and accelerate the establishment of a new model for real estate development
Improve the expectation management mechanism, enhance policy transparency, and stabilize enterprises and residents' expectations regarding future prices, income, and employment.
Smooth the national economic circulation system conducive to a reasonable rebound in the overall price level. Deeply implement special actions to boost consumption, optimize the implementation of &#34;two new&#34; policies, expand the supply of high-quality goods and services, cultivate new business formats, models, and scenarios for consumption, and eliminate unreasonable restrictions in the consumption field. Comprehensive rectification of &#34;involution-style&#34; competition, resolutely break down the bottlenecks hindering the construction of a unified national market, legally safeguard workers' rights to rest and vacation, promote continuous optimization of market competition order, and regulate market price order. Coordinate the expansion of domestic demand and deepen supply-side structural reforms, lead industrial innovation with technological innovation, guide enterprises from &#34;price competition&#34; to &#34;value competition,&#34; and accelerate the cultivation of new driving forces for economic development.
Promote economic system reforms conducive to a reasonable rebound in the overall price level. Accelerate the reform of the market-oriented allocation of factors, so that factor prices truly reflect usage costs, supply-demand relationships, and scarcity levels. Promote the reform of price governance mechanisms, innovate pricing mechanisms for public services and utilities, improve the formation mechanisms for resource and energy prices, and enhance price regulation mechanisms to maintain reasonable price levels. Improve the income distribution system, optimize the mechanisms for determining, reasonably increasing, and ensuring the payment of workers' wages, implement income increase plans for urban and rural residents, strengthen redistribution adjustments through taxation, social security, and transfer payments, and promote the formation of an olive-shaped distribution pattern. Improve the linkage mechanism between price increases and subsidies for low-income groups, and prepare contingency plans for livelihood support related to price changes.
Written by: Zeng Zheng
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The article points out that promoting a reasonable recovery of prices is a systematic project that requires relying on market-oriented means such as stabilizing employment income, promoting market competition, and streamlining the pricing mechanism, rather than solely relying on administrative intervention. At the same time, it is necessary to avoid policy overshooting that leads to excessively rapid price increases, which could affect economic stability and the guarantee of people's livelihoods

Special commentator of "Qiushi" magazine: Actively promote a reasonable rise in prices