Da He Ri Gong Yi Zu | Actively Promote a Reasonable Rebound in Prices

On February 1st, the journal ‘Qiushi’ published an article titled ‘Actively Promote a Reasonable Rise in Prices’.

The article begins by pointing out that the issue of prices is an important matter concerning economic and social development. The current low prices are already detrimental to the virtuous cycle of the economy and social stability, and it is a problem that needs to be addressed urgently.

So, if you pay attention, you can find that from the new national standard electric vehicles at the end of last year to the cancellation of low-priced air tickets at the beginning of the year in the name of anti-involution, and now the ‘encirclement and suppression’ of low-price strategies in various industries,

A theme runs through it all: promoting price increases.

When consumption downgrading becomes a common trend, perhaps only by administrative means to set a price floor can the spiral of price decline be stopped. Raise prices to reduce inventory, I’m familiar with this.

The article first puts forward a general argument: low prices—weak expectations—less consumption—low corporate profits—low resident income—weak expectations—less consumption—low prices.

We all know that there is an inflationary spiral, and the inflationary spiral will also strengthen itself. Then, it cited the opposite of an inflationary spiral, saying it was a cycle of predicament.

Then some people will ask, aren’t there relevant terms? Why invent one?

You see, some words we can say without any harm, but they cannot be said carelessly.

But I’ll just say it directly, it’s deflation.

Are there any solutions?

The ‘Qiushi’ article mentions some measures, such as more proactive fiscal and macro policies, expanding the deficit, cutting the reserve requirement ratio and interest rates, stabilizing real estate, and optimizing supply, etc.

But to be honest, it’s still a bit path-dependent.

I can understand the policy makers’ intention to boost domestic demand and improve distribution, but most of these measures are still centered on the supply side and macro-control.

They are certainly important, but they are too far from the income growth of ordinary residents, and the effect is too slow.

Actively promoting fiscal policy itself is not a problem, but whether to subsidize the production side or the consumption side is the core issue?

The problem is objectively existing, and the solution is also clear, but inertia is not easy to change.

For a long time, China has had insufficient supply, so it has developed a path dependence of subsidizing enterprises and stimulating production.

Even policies like ‘Home Appliances to the Countryside’, which seem to directly target consumers, its core operation is also centered on specific enterprise catalogs and tax rebates.

The goodwill of the policy is habitually poured into the enterprise level, and then it is expected that the enterprise can pass on this ‘rain and dew’ to employees and consumers.

There are few things in the policy toolbox that directly reach residents (e.g., giving out money?)

In fact, there is a simplest way to promote price increases: strictly implement the Labor Law, effectively reduce working hours, and truly raise the minimum wage standard.

Keep the individual’s work boundary, and whoever gives less money and does more work will be made to pay the price with the iron fist of the law.

When workers have more rest time, then they have more time to consume, and the demand side rises.

On the other hand, the supply side may decrease.

Between this increase and decrease, won’t prices naturally achieve a ‘reasonable rise’?

Instead of blocking enterprises from giving benefits to consumers, it is more effective to actively promote a reasonable rise in animal (cattle and horses) prices (wages).