Although the whole world is experiencing a wave of inflation, China only experienced an inflation rate of 2% in 2022. Considering China's important position in the global industrial chain, the market has been worried about the inflation situation in China.
However, with the optimization of epidemic policy, China's economy continues to heat up. In its latest report, the International Monetary Fund (IMF) raised China's economic growth forecast by 0.8 percentage point to 5.2%.
Although economic confidence has been boosted, the market is still worried about inflation.
What are the measures to control inflation?
Because a basic factor of inflation is that the total supply exceeds the total demand, there are two basic ways to control inflation:
1. Controlling demand: Implementing austerity policy is a traditional way to deal with inflation all over the world, and it is also the most widely used and efficient policy.
2. Improve supply: improve the labor efficiency of employees, enhance the investment confidence of companies, reduce government restrictions on companies, and encourage technological innovation through tax reduction.
Inflation is due to the fact that the specific demand of commodity market is lower than the money supply, which leads to the sustained and extensive growth of the price level for a period of time, that is, the actual purchasing power exceeds the output supply, which leads to the devaluation of the currency. In essence, the total social supply is lower than the total social demand (supply is less than demand).