Regulation of the price hike will not help curb investment (July 16, 2007)

 Regulation of the price hike will not help curb investment (July 16, 2007)
and going to the monthly CPI data release time. Every time, the market will feel anxious mm may raise interest rates it? Lack of transparency in the information the school is called , CPI for three consecutive months has been reached or exceeded 3%. For the data coming in June, the market forecast of 4% or more. However, this led by the CPI changes in food prices has its own laws: the food The demand is relatively rigid mm most people will not be the price of pork rose 2 2 yuan to eat two pork. Therefore, the price changes depending on the elasticity of supply response. In this regard, interest rates or other monetary policy is not reduce the demand for food, it is impossible to speed up the supply of food, which does not help the price come down. In fact, the recent change in CPI in 2004 are exactly the same. In 2004, the same driven by food prices, CPI in the year 7 , 8, and September remained at 5% for three consecutive months or more, then again, driven by falling food prices fell steadily throughout the year of the CPI, it was only 2.4%. The September 2004 and the year after the CPI decrease in October 29, what interest rates because of what that fruit, we can only say that the monetary policy response to market supply and demand of agricultural products, rather than the other.
addition to price, the interest rates on the need for another important consideration is investment. As of May, urban fixed asset investment grew by 25.9% over the same period last year dropped by 4.4 percentage points, investment growth has slowed dramatically, the expected annual maximum not more than 26%. drop in investment growth Meanwhile, the investment structure has become rational. as a share of urban fixed asset investment up 31% of the strong manufacturing sector, losses and loss in the number of firms is declining, May's total profit last year rose more than 1.6 times The trend reflects a new round of heavy and chemical industrial sub-sectors, such as special equipment, transportation equipment, electrical machinery, the more violent its earnings growth. then urban fixed asset investment accounted for more than 25% of real estate, for example, by the City speed up the process, the impact of the 1980s baby boom, housing demand has been faster than the growth rate of housing supply. This year in May, housing sales area has been completed in the area equivalent to 188% over the same period, the problem is very prominent in short supply. In addition, with the relatively backward areas of urbanization and population increase income levels, real estate investment are emerging from the developed areas transferred to other parts of the country situation .5 month, Beijing, Shanghai, Tianjin, Jiangsu, Zhejiang, Guangdong, Liaoning, 7 provinces and municipalities accounted for 50% of real estate investment than in 2004 dropped by 10 percentage points. manufacturing and real estate investment changes reflect two industries are entering a new round of China's industrialization and urbanization process, which is macro- changes in the supply side, while monetary policy can only affect the total demand. especially for the housing market, as monetary policy can not cope with rising food prices, as presented in the demand for housing relative to the rigid case, the interest rate can only increase the burden on ordinary citizens, And on what does not help to increase housing supply.
and investment since the price hike should not be the reason, then, what do the rest? credit should not be, because the credit growth is very stable. Currency supply should not be, in addition to the current problems caliber monetary statistics, there are now changes in M1 and M2 is almost entirely driven by internal factors. For example, according to our research found that household savings will lead to the stock market move increase in M1 growth, M2 growth rate decline. Funny thing is, there is a saying recently to raise interest rates (and the abolition of interest tax) to increase household savings initiative. I remember a few years ago when the consumption slump, when the capital market malaise Some people called out to make savings deposits to capital market investment to consumption. Now, when more and more people really ignited the passion and consumer enthusiasm for investing the time, it seems that those same people, they began to say exactly the opposite from the words. Capital market development has been the State Council put in the reform structure of our financial system, changing the strategic level of economic growth, the future still have to focus on increasing supply, administrative controls should be relaxed, especially on the issue of the control, and the need to strengthen and improve the market-oriented regulatory system. These are the cliches, all belong to the supply dimension, and management of monetary policy independent of aggregate demand.
Therefore, on the economic and financial fields of the main variables to see We do not need to raise interest rates. So are we will not raise rates? The answer is clearly not that simple. Earlier this year, the management has set the CPI target of 3%, which may not continue for several January CPI exceeded indifferent. However, the need of special note is the current major macroeconomic statistical variables (such as CPI, money supply, stock index, etc.) there are many defects, and may even distort our view of the real world situation, Simply set these variables goal of macroeconomic control, the effect of regulation will be affected most is the interest rate increase will be difficult to achieve the desired results.