By Wang Likun, Institute of Market Economy, DRC

Research Report, No.172, 2020 (Total 5916) 2020-7-7

Abstract: Since the beginning of this year, China’s economic development has suffered with the double shocks from both its demand- and supply-sides due to the outbreak and spread of COVID-19 virus. As a result, the supply and demand relationship has been profoundly adjusted, and the price trend, in turn, has undergone major changes. From January to May, the year-on-year trend of CPI has witnessed a continuous decline from a high level and PPI has seen a notable reduction compared to that of last year. With the further restoration of daily life and production order owing to the normalization of epidemic control and prevention effort, it is expected that the supply and demand for residents’ consumption and industrial products will both show enhancement. In line with the judgment based on the price trend of last year, it is predicted that the year-on-year trend of CPI will witness a steady fall in the second half of 2020 and PPI will increase month-on-month and stop falling and turn positive. To this end, the following policy options are proposed. First, work needs to be done to further stabilize prices through measures such as expanding domestic demand and establishing long-term mechanism for hog industry. Second, the favorable opportunities need to be seized so as to push ahead with the construction of bulk commodity market system, its structural adjustment and reform of its pricing mechanism, with the aim of preventing the potential price-rising risks in fields of bulk commodities and foods so as to forge a sound pricing environment for the stability in employment, financial sector, foreign trade, foreign investment and expectations and the guarantees on employment, fundamental livelihood, market entities, food and energy security, industrial supply chain and grass-root operation.

Keywords: CPI, PPI, performance assessment, trend analysis, policy options