Factors driving the overall price level to continue to rise.

The macroeconomic situation remains optimistic. Internationally, according to the predictions of many authoritative departments at home and abroad, although the growth rate of world economy and trade has slowed down compared with the previous year, it will still maintain rapid growth, and the international environment is more favorable to China's economic development. Domestically, China's national economic development took an important turn for the better last year. The acceleration of economic growth, the obvious improvement of the quality of economic operation and the continuous improvement of the macro-control system have laid a good foundation for the national economy to maintain a good development momentum this year. This year, the country will continue to adhere to the policy of expanding domestic demand, implement a proactive fiscal policy and a prudent monetary policy, and the economic development is expected to continue to maintain rapid growth. Overall, the macroeconomic environment is conducive to the further recovery of the overall price level.

The increase in the prices of the means of production will have a certain cost promotion effect on the overall price level. Since last year, the prices of means of production have continued to rise, and the prices of important means of production such as oil and its products, non-ferrous metals and steel have all risen sharply. The prices of means of production may continue to rise this year, but the extent may be lower than last year. The main factor driving the price increase of means of production will still be the price of crude oil. Because the first quarter is the peak period of crude oil consumption, the price of crude oil in the international market will remain high in the first half of the year, and may fall from high price in the second half. However, if the situation in the Middle East worsens, the crude oil inventory level continues to decrease or the phenomenon of speculative buying and hoarding intensifies, the oil price may also remain high, which may drive the prices of China's means of production to continue to climb. The prices of general means of production may still maintain a slight upward trend. Although the overall overcapacity of industrial consumer goods and the contradiction between supply and demand in the industrial consumer goods market have weakened and blocked the influence and transmission speed of the price increase of upstream products on the prices of downstream products, the price increase of basic products such as these raw materials will still be gradually reflected in the price changes of downstream products, and to some extent, promote the overall price level.

Under the influence of a slight rebound in food prices, food prices are expected to stop falling and stabilize. Food price has a great influence on the overall price level, and the change of food price plays a decisive role in the trend of food price. Due to the sharp reduction in grain production last year, food prices stopped falling and rebounded in the second half of the year. However, China has abundant grain stocks, and the total grain supply will still be slightly greater than the demand. Generally speaking, after several years of decline, food prices have reached the bottom, and it is unlikely to continue to fall this year, but it may be a steady and slightly rising trend. The change of food price will affect the change of the whole food, especially the price of meat, poultry and eggs. Food prices may reverse the downward trend in recent years, and the stability of food and food prices will have an important impact on the overall price level.

Service items and house prices will continue to rise. As all localities will continue to adjust the prices of residential and service items such as urban tap water, rent and urban bus fares this year, the state will also increase the water price of water conservancy projects and the price of urban and rural water supply, and the prices of service items and residential services will continue to rise, which will become the main factors driving the overall price level to rise.

Factors that inhibit the overall price level from continuing to rise

Despite the above factors, we believe that the overall price level of China market will not rise sharply this year, and inflation is unlikely to rise. This is mainly because there are still some factors that inhibit the further rise of the overall price level in economic life:

First of all, there is insufficient motivation for demand growth to push prices up sharply. At present, the foundation of China's economic recovery is not stable, and some deep-seated contradictions in economic development and the disorder of total social supply have not been fundamentally solved. Economic growth mainly depends on the support of the country's active fiscal policy, and the internal motivation of economic development and sustained growth of demand is insufficient. The income growth of farmers and some urban residents is slow, and many reform measures such as housing, education, medical care and old-age care have been introduced one after another and will be introduced soon, which has curbed the growth of residents' consumption demand. It is expected that the growth rate of world economy and trade will also slow down. Since the second half of last year, the growth of social demand in China has shown signs of slowing down. Compared with the first half of last year, the growth rate of consumption, investment and export dropped significantly. Since July, the growth rate of money supply at all levels has continued to drop, indicating that the contradiction of insufficient domestic demand has not been fundamentally eliminated, and there is insufficient motivation for further recovery of the overall price level.

Second, the relationship between supply and demand in China's market will still be oversupply, and it is difficult for the prices of industrial consumer goods to stop falling and rebound. Although the pace of economic restructuring in China has been accelerated, and a few industrial products are in short supply, the situation of overcapacity in most means of production and industrial consumer goods has not changed significantly. In addition, with China's imminent accession to the WTO, import tariffs on some products have been gradually lowered. Low-priced imported goods will have a certain impact on the domestic market, and the impact on some consumer goods markets may be even greater. In addition, consumers' expectations of further decline in market prices after China's entry into WTO are relatively strong, which will lead to more intense market price competition. The prices of many commodities, especially industrial consumer goods, will continue to decline, and some commodity prices may fall even more.

Third, the increase in service items and house prices may be slightly lower than last year. Although some services and housing prices will be raised in some areas this year, considering the affordability of residents and the scope of price adjustment and adjustment projects in the past two years, the price adjustment this year is lower than last year. In addition, in order to promote the growth of domestic demand, the state will gradually introduce some policies and measures to reduce fees and prices, such as reducing housing construction fees, car use and purchase fees and domestic telecom tariff standards, and controlling the excessive rise of tuition and miscellaneous fees, which will have a certain inhibitory effect on the upward trend of service items and housing prices. Therefore, the increase in service items and house prices may be slightly lower than last year, and the driving effect on the overall price level may be weakened.