Core Viewpoint - The article emphasizes the necessity of supply-side structural reforms in China to address the dual issues of structural overcapacity and insufficient supply, which arise from the lagging supply structure compared to the changing demand structure due to high-quality economic development [2][5]. Group 1: Economic Indicators and Trends - As of May this year, the Producer Price Index (PPI) has experienced negative growth for 32 months, with no immediate signs of recovery, marking a historical duration that surpasses previous economic crises [3]. - The GDP deflator has also turned negative for eight consecutive quarters, indicating a broad-based price decline that has transmitted from the supply side to the demand side [3]. - The Consumer Price Index (CPI) target was lowered from 3% to 2% in the government work report, reflecting a shift from a restrictive to a more result-oriented target [4]. Group 2: Supply-Side Reform Necessity - There is a consensus among policymakers and market investors that a new round of supply-side reforms is imperative, yet the definition of this reform remains vague among analysts [6]. - The previous supply-side reform was initiated in response to significant economic pressures and aimed at addressing structural issues, but the current context requires a more nuanced approach to reform [6][7]. Group 3: Real Estate Market Dynamics - The article highlights the urgent need to accelerate the de-inventory process in the real estate sector to prevent a potential deflationary trap, which could dampen consumption and investment [11]. - The real estate market is still in a phase of adjustment, with significant inventory levels persisting despite government efforts to stabilize the market [13][14]. - The challenges of de-inventory are compounded by the high proportion of real estate in household assets, which is significantly higher than in developed economies [15]. Group 4: Structural Overcapacity and Competition - The article discusses the issue of structural overcapacity and the phenomenon of "involution" in various industries, which has led to intensified competition and reduced profitability [18][19]. - The government is increasingly focused on addressing "involution" through regulatory measures to maintain fair competition and prevent market distortions [22][21]. Group 5: Policy Recommendations - The article suggests that the new supply-side reform should not merely replicate previous efforts but should adapt to the current economic landscape, emphasizing green transformation and technological innovation [28][29]. - It advocates for the establishment of a unified national market to eliminate local protectionism and enhance resource allocation efficiency [32][33]. - The article also highlights the importance of supporting enterprises in expanding into international markets to mitigate domestic competition pressures [34][35].

Core Insights - The People's Bank of China is shifting its price control strategy from managing high prices to managing low prices, focusing on stabilizing the "old-for-new" consumption policy in the short term and promoting service consumption in the long term [1] - The Consumer Price Index (CPI) has shown negative growth for four consecutive months, primarily due to food and energy prices, while the core CPI has rebounded significantly since October last year, indicating a more stable economic supply-demand relationship [1][2] - Analysts emphasize the importance of maintaining the stability of the "old-for-new" policy to boost core CPI, alongside direct subsidies to stimulate demand and regulate industry pricing [4][5] Price Trends - Home appliance prices have improved from a year-on-year decline of -3.3% in October 2024 to -0.2% in May 2025, while transportation tools and communication tools have also shown recovery in price growth [2] - Residential prices have remained stable with minimal fluctuations, while other service prices continue to be a drag on the overall CPI [4] Future Outlook - Analysts predict that boosting core CPI will require further recovery in the real estate market and increased direct subsidies to demand, rather than solely focusing on housing prices [4][5] - The "old-for-new" policy is seen as a critical lever for maintaining price stability, with suggestions to expand subsidy coverage to service sectors like home services and education to stimulate consumption [5][6] - Long-term strategies should include "new supply-side reforms" to enhance the proportion of final consumption expenditure in GDP, alongside measures to improve social security standards and reduce household burdens [6][7]