Core Viewpoint - The article emphasizes that while macroeconomic policies have some effectiveness in stabilizing the economy, relying solely on these policies is insufficient to resolve the current economic challenges. It suggests that a multifaceted approach is necessary to stimulate demand and stabilize prices, particularly focusing on income stability, employment, and the real estate market [2][3][7]. Demand Analysis - The persistent low demand is attributed to insufficient effective demand rather than mere willingness to consume. Effective demand, a key concept in Keynesian economics, refers to demand backed by purchasing power, which is influenced by income levels and employment quality [4]. - The decline in disposable income is primarily due to high unemployment rates among the youth and deteriorating job quality, leading to reduced consumption capacity. This is exacerbated by falling real estate prices, which negatively impact household balance sheets and increase savings rates, further suppressing consumption [5]. Investment Demand - Investment demand is also weak, reflected in reduced corporate investments and declining local government investment capabilities. Factors such as market downturns, increased competition, and deteriorating financial conditions have led to a decrease in corporate investment appetite. Local governments face fiscal constraints due to reduced land sales and tax revenues, limiting their ability to invest [6]. Supply-Side Analysis - The article highlights that overcapacity is a significant issue, driven by the phenomenon of "involution," which indicates a lack of effective market clearing mechanisms. This results in persistent overcapacity and price declines, as the market fails to eliminate excess supply effectively [6][10]. Policy Recommendations - To stabilize prices, the article suggests that income stability is crucial, which in turn relies on stable employment and robust corporate performance. It advocates for a shift in fiscal policy focus from "heavy investment" to "heavy consumption," emphasizing direct support for consumer spending and social security for low-income groups [7]. - The stabilization of the real estate market is deemed essential, as falling property prices adversely affect the financial health of households, businesses, and local governments. The article calls for proactive policies to support the real estate sector to restore economic balance [8]. Market Clearing Mechanism - The article stresses the need to reconstruct the market clearing mechanism to address the issues of overcapacity and "involution." This involves ensuring that enterprises can exit the market effectively, particularly state-owned enterprises that may be propped up by soft budget constraints [10][12]. - It suggests that reforms should include clarifying property rights for state-owned enterprises, aligning local government fiscal responsibilities, and introducing competition policies to facilitate market entry and exit [12]. Conclusion - The article concludes that while expansionary policies can mitigate short-term shocks, structural reforms are essential for long-term stability. It emphasizes the importance of restoring supply-demand balance and achieving a moderate price increase to support potential economic growth [12].

Core Viewpoint - The article discusses the persistent low inflation and deflationary pressures in China's economy, highlighting the need for targeted macroeconomic policies to address the underlying issues of insufficient effective demand and overcapacity [4][5][6]. Demand Analysis - Insufficient effective demand is primarily characterized by a lack of consumption demand with purchasing power, which is influenced by stagnant or declining income levels [5]. - The main source of household income is wage income, which has been negatively impacted by high youth unemployment rates and declining job quality [5]. - The decline in real estate prices has worsened household balance sheets, leading to increased savings rates and suppressed consumption [5][6]. Investment Demand - Investment demand is weak, reflected in reduced corporate investments and declining local government investment capabilities [6]. - Corporate revenue has been declining due to market sluggishness and increased competition, leading to lower investment demand [6]. - Local governments face fiscal constraints due to reduced land sales and related tax revenues, further limiting their investment capacity [6]. Supply Analysis - The current overcapacity issue is exacerbated by the "involution" phenomenon, which reflects a lack of effective market clearing mechanisms [6][7]. - The failure of the price clearing mechanism has resulted in persistent overcapacity, as firms are not incentivized to exit the market despite losses [7][9]. Policy Recommendations - To stabilize prices, it is essential to stabilize income, which hinges on employment and corporate stability [7]. - The focus of fiscal policy should shift from "heavy investment" to "heavy consumption," emphasizing direct support for consumer spending [7]. - Stabilizing the real estate market is crucial, as its decline negatively impacts the balance sheets of households, businesses, and local governments [8]. - Addressing the "involution" issue requires reconstructing market clearing mechanisms to ensure that supply and demand can adjust effectively [9][10]. Structural Reforms - Structural reforms are necessary to enhance the market exit mechanisms for inefficient firms, particularly state-owned enterprises [10]. - The alignment of fiscal powers and responsibilities at the local government level is critical to prevent the maintenance of inefficient capacities [10]. - Introducing competition policies across various sectors will ensure equal access and exit for all market participants [10].

Group 1: Capacity Reduction Strategy - The "anti-involution" price governance aims for three goals: short-term regulation of price wars, medium-term capacity reduction, and long-term price recovery, particularly PPI[1] - Capacity reduction can be categorized into two types: shutdown and production limitation, and policy-guided capacity reduction[1] - The current trend favors policy-guided capacity reduction over shutdowns, as the demand side lacks strong stimulus policies[1] Group 2: Price Recovery Expectations - PPI is expected to take 11-12 months to turn positive, potentially reaching around 1.9% by September 2026 under neutral assumptions[1] - Three scenarios for PPI recovery are outlined: optimistic (3.86%), neutral (1.92%), and pessimistic (0.9%) by September 2026, depending on the strength of supply-side capacity reduction[3] - The GDP deflator's recovery is more challenging than PPI due to the service sector's larger weight, with the second industry experiencing a -3.06% deflation in Q2 2024[3] Group 3: Market Clearing Mechanism - The market clearing mechanism is essential for addressing capacity surplus, requiring timely price adjustments and responsive supply behavior[22] - Current obstacles include government subsidies allowing firms to sell below cost, leading to persistent losses and market inefficiencies[24] - Previous efforts to clear "zombie enterprises" in coal and steel sectors have shown significant results, with 115 million tons of capacity addressed[24]

Core Viewpoint - The case of Zitian Technology highlights the deep-seated contradictions in corporate governance and regulatory arbitrage within the capital market, serving as a cautionary tale of systemic financial fraud and extreme resistance to regulation [1] Group 1: Financial Fraud and Regulatory Resistance - The crisis of Zitian Technology traces back to the change of actual controller in 2016, leading to aggressive capital operations that created a facade of prosperity, with accounts receivable reaching 2.194 billion yuan by the end of 2022, exceeding annual revenue [2] - Systematic fabrication of transactions was revealed, including the forgery of 812 million yuan in server prepayments in 2022, which later turned into unsubstantiated inventory, and the recognition of revenue from cloud services that had not commenced operations [2] Group 2: Regulatory Confrontation and Consequences - The company faced comprehensive resistance during the on-site inspection initiated by the Fujian Securities Regulatory Bureau in April 2024, including a vacant registered address and refusal to provide financial materials, leading to two investigations by the CSRC in September and October 2024 [3] - As of May 6, 2025, the company's stock has been suspended, with a risk of delisting if the annual report is not disclosed within two months, following a net outflow of 140 million yuan in principal funds in the five trading days before suspension [4] Group 3: Punitive Measures and Regulatory Changes - The incident set multiple regulatory records, with the audit partner fined 1 million yuan and banned from the market for six years, while the actual controller and executives faced fines totaling 800,000 yuan and a ten-year market ban [5] - This combination of penalties signifies a shift in regulatory focus from mere punishment to disrupting the capacity for illegal activities, particularly targeting key links in the financial fraud ecosystem [5] Group 4: Transformation and Governance Deficiencies - Zitian Technology's aggressive transformation from traditional forging machinery to internet advertising and cloud services is characterized as "pseudo-innovation," lacking substantial business support, leading to significant goodwill impairment of 569 million yuan in 2023 [6] - The crisis of Zitian Technology transcends individual cases, becoming a litmus test for the market clearing mechanism under the registration system, with potential delisting marking a precedent for forced delisting due to continuous regulatory resistance and systemic financial fraud [6]