According to reports, the four central power enterprises, Huaneng, Huadian, Datang and Guodian, jointly submitted a report to the Shaanxi Provincial Government, requesting the government to increase electricity prices. The four major power state-owned enterprises said that the current price of thermal coal has exceeded the cost of enterprises. In the recent period, China’s commodity prices have experienced an incomprehensible rise, led by black products. This upward pressure that is not driven by demand is being transmitted downstream, and power plants are the first victims.
(Jiangxi New Materials Co., Ltd.)
There is no growth in demand at the macro level, but at the micro level there are crazy price increases for various upstream commodities. This must be something wrong. If you analyze carefully, you will find that the first to increase prices are coal, coke, steel and other black products in the “overcapacity reduction” field. They are the hardest hit areas of China’s overcapacity, but now they have become the dark horses of price increases. One of the important reasons is that in order to achieve the goal of supply-side structural reform to reduce overcapacity, the government restricted coal production, causing supply shortages. At the same time, on the demand side, China has stepped up infrastructure construction and real estate investment has begun to recover. As a result, the supply of coal, steel, etc. has declined and the demand has increased. This has manifested itself as upstream companies taking advantage of their market advantage to increase prices.
However, the prices of oil and natural gas, which are determined by the international market, have not experienced such a sharp increase. Obviously, the price increase of bulk commodities is typical of China, that is, a phenomenon unique to China. Why is this so? An important reason is that commodities have become the object of financial speculation. In the past few years, China’s excess funds have been running around in various markets and creating bubbles. Last year’s stock market, this year’s property market, bond market and futures market have all been chased by funds in turn. The futures market has a high leverage ratio, is more speculative, and is easy to control. When overcapacity cuts cause tight supply and demand in some areas, going long in commodity futures will undoubtedly promote and climb up with the spot market, thereby obtaining high profits. In essence, this is still the product of China’s excess funds. Continued loose monetary policy will encourage guerrilla-style speculation of funds in various assets and commodities.
If it is just speculation, prices will easily fall back, but this time it is based on tight supply. It may be difficult for commodity prices in the field of overcapacity reduction to fall back in the short term. In addition, this time through overcapacity reduction, environmental protection, etc. The closure and transfer of means covers a wide range of areas, and the price increases in the upstream are expected to continue to be passed on to the downstream. However, there are no signs of improvement in downstream end product sales and corporate profits. Therefore, we may face two possibilities in the future. One is that the cost cannot be passed on and the demand side pays the bill, leading to a further deterioration of the manufacturing operating environment; the other is that prices will eventually be transmitted to the end market, causing inflation and shrinking market demand. .
At present, the possibility of causing comprehensive inflation, or potential “stagflation” is not high. The current rise in commodity prices is not determined by demand, but is a short-term phenomenon caused by artificial capacity reduction and capital speculation. Comprehensive inflation in an economy requires a rapid expansion of market demand in addition to the condition of excessive money supply. Come “ignite”. However, the current downward pressure on China’s economy is relatively large, and China is stabilizing economic growth through moderate aggregate demand management rather than promoting growth through huge stimulus. This means that the Chinese government cannot cause excessive market demand through large-scale investment. The overheating of the economy determines that the possibility of inflation is relatively low.
However, the recent continued depreciation of the RMB will inevitably lead to price increases for bulk commodities such as oil, grain, ores, which China mainly relies on imports, and this increase is rigid and universal. However, the RMB may continue to appreciate relative to non-US currencies. This situation will inevitably increase the possibility of imported inflation, and the impact on China’s manufacturing industry may gradually increase.
The combination of domestic and international factors may mean that the cost of China’s manufacturing industry will rise significantly in the future, which will push up PPI and CPI. However, given the sluggish domestic and international market demand, this cost The rise will squeeze companies and cause profit losses. This is very important for the Chinese economy in Transformation and Upgrading (爱记, Net Worth, Information) A potential hit. China should actively promote the process of tax reduction, significantly reduce the cost of commodity circulation, reduce costs for production companies and terminal sales, and prevent the real economy from gradually deteriorating under cost pressure.
