Inflation May Become A Potential Risk Source For 2017.

Inflation is not the main concern of the people's Bank of China at present, but there is a handicap in its macro policy management.

The soaring housing prices led to a lot of pressure on the central bank, especially when the house was used to live.

The soaring housing prices not only bring financial risks, but also increase the cost of business and hurt the real economy.

Soaring prices of raw materials have also brought about the same problem, further increasing the need and political will of the central bank to control liquidity.

Two months ago, when I heard the double digit price rise of air-conditioning manufacturers, I realized that inflation is going to heat up.

In December, PPI rose 5.5% over the same period, highlighting the source of this round of inflation. In the same month, CPI fell to 2.1%, which was disguise by the fall of vegetables in warm winter, and non food prices continued to heat up.

The author engaged in the financial industry economic analysis for more than twenty years, last time the double digit price rise of white goods, or in the early stage of career.

Unlike last time, this price increase is purely cost driven.

The price of raw materials, led by "double coke", surged in 2016, and from pulp to food prices soared, forcing downstream manufacturers to increase their prices.

The demand for raw materials in the market has risen as a result of the PPP led infrastructure investment, but the demand recovery is out of proportion to the soaring price of raw materials.

In 2016, two rounds of raw material prices skyrocketed. In my view, all of them were driven by the middle reaches, and the financial market led by futures market was the initiator of this PPI rise.

Excess liquidity, stimulating the futures market to promote raw materials, coincided with low inventory prices, rebound in prices.

The rebound price drives more capital to rush into the market, so prices rise steadily, so the manufacturers cherish the goods and cover up the market and form speculation.

Financial attributes, rather than industrial attributes, have pushed up the price of raw materials, which is the same as last year's real estate market.

The rising price of raw materials has already forced the downstream enterprises to increase their prices.

Inflation has already risen.

RMB depreciation also brings import inflation.

In view of the current economic situation, China's economy has stabilized in the short term, but PPP related investment, the whole

It is not vigorous, so there is no pressure on hyperinflation for the time being, but CPI's breakthrough of 3% is not unthinkable.

Another thing that happened in 2016 is

A sharp decline.

Over the past decade, China's foreign exchange reserves have risen rapidly, which was once the largest source of domestic liquidity in the central bank, and the correlation between foreign reserves and money supply is very high.

Now, foreign reserves suddenly plunged. Not only did the stable exchange rate ammunition decrease, but the central bank also passively contracted liquidity, which was an important reason for the sharp rise in interbank interest rates and the collapse of the bond market in the fourth quarter of last year.

Nowadays, there are more and more policy constraints. The most loose monetary time has become the past. Perhaps the positive fiscal policy really needs to be more positive.

The financial expansion of this government has always been a heavy thunderstorm, and has been actively supported by steady monetary policy.

Whether the fiscal policy can really become active in 2017 is very important for the trend of economic growth.

Inflation is heating up not just in China.

Wage growth in the United States has begun to accelerate, and it is estimated that consumer prices may be pmitted in a few months.

The sharp rise in oil prices is bound to drive the price of consumer energy worldwide.

The author believes that, in addition to the frequently talked about election and central bank events, inflation may be a potential risk source for the market in 2017.

If inflation stories come true, risky assets are bound to face new variables.

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