Market News International:

What are the considerations behind setting this year's CPI target increase at around 2%? What policy measures will be implemented to promote a moderate rise in prices? Thank you.

Shen Danyang:

These questions will be answered by Mr. Chen.

Chen Changsheng:

Thanks for your questions. This is a topic of broad societal concern that spans both macro and micro aspects. Prices are fundamental signals in a market economy, acting as the "body temperature" of economic operations. Neither excessively high nor persistently low levels are desirable. You may have noticed that China's price levels have generally stayed low over the past two years. From a static consumer perspective, this may seem like a good thing, as the same 100 yuan can buy more goods. However, from a dynamic perspective of national economic circulation, persistently low prices pose challenges. They result in higher real interest rates, heavier debt burdens, reduced corporate investment, and fewer opportunities for employment and income growth. Historical experiences and practices from countries worldwide indicate that moderate price increases are signs of healthy economic functioning.

In this year's government work report, the CPI increase is projected at around 2%, differing from previous years and signaling a more proactive, policy-driven approach. The rationale is to strengthen the guiding role of price indicators for both society and the market, as current downward price pressures exceed upward trends. By implementing policies to promote a moderate rise in prices, we can protect people's basic livelihoods. This approach also helps boost market confidence, encourages businesses to invest more, and creates more opportunities for citizens to find jobs and increase their income, ultimately benefiting the overall macroeconomic cycle.

In terms of this year's deployment, you can closely review the government work report, which outlines four key measures. First, we will intensify counter-cyclical adjustments in our macroeconomic policies. We will leverage fiscal, monetary and other policies to balance supply and demand. Second, we will prioritize stimulating consumption to tap demand-side potential. Consumption is the ultimate demand, and robust consumption fuels national economic circulation and helps stabilize prices. Third, we will take comprehensive steps to address rat race competition and price wars. There are profound underlying reasons behind price wars. We should take measures such as strengthening standards, enhancing supervision, promoting industry self-regulation, and regulating local governments' investment attraction practices. These steps will ensure prices reflect quality, reinforce the principle of "you get what you pay for," and prevent a situation where "bad money drives out good." Fourth, we will make greater efforts to stabilize the real estate market and the stock market. The real estate and stock markets serve as critical economic barometers, with real estate constituting the largest share of household assets. Stabilizing the real estate and stock markets can unleash wealth effects, boost consumption, and facilitate moderate price recovery. Thank you.