Core Viewpoint - The report from the Chinese Academy of Social Sciences indicates that while the Chinese economy is stabilizing, persistent low prices are dragging down nominal economic growth, widening the gap between macro and micro economic conditions [1] Economic Indicators - The Consumer Price Index (CPI) has shown a year-on-year growth rate around 0% for 27 consecutive months, while the Producer Price Index (PPI) has seen a year-on-year decline of 3.6%, marking 33 months of negative growth [1] - The GDP deflator has recorded negative year-on-year growth for nine consecutive quarters, surpassing the seven quarters of negative growth during the 1998 Asian financial crisis [1] Causes of Low Prices - The low price environment is attributed to the pains of transitioning from old to new economic drivers. While the impact of durable goods and rental prices on CPI has eased, weakened income expectations are constraining service consumption growth, preventing a virtuous cycle of consumption expansion, price increase, and wage growth [1] - Supply fluctuations, weak domestic demand, and shrinking external demand are increasing downward pressure on PPI, particularly in midstream chemical products and downstream essential consumer goods [1] Policy Recommendations - The report suggests five key recommendations to address the low price situation, including increasing nominal fiscal deficit rates, implementing inflation-targeted monetary policies, and stabilizing real estate prices to mitigate liquidity risks for major property firms [2] - It emphasizes the importance of enhancing service consumption to alleviate persistent low prices, as service consumption tends to exhibit differentiated supply expansion and price increases, unlike the homogeneous supply of general goods [2][4] Future Outlook - The report anticipates that the focus of macroeconomic regulation will be on strengthening the coordination of fiscal, monetary, industrial, employment, and social security policies to promote economic supply-demand balance and reasonable price recovery [4] - It advocates for the inclusion of a broad price index, covering general prices (CPI, PPI, and GDP deflator) and asset prices (housing and stock prices), into macroeconomic regulation targets, and encourages the use of unconventional counter-cyclical adjustment policies [4]

Group 1: Current Price Trends - The GDP deflator index has been negative for 8 consecutive quarters, marking a historical high duration[16] - The Producer Price Index (PPI) has been in negative territory for 31 months, with a monthly average decline of 1.34 percentage points from coal, black metal, and non-metal industries[19] - The Consumer Price Index (CPI) has dropped to a growth center of 0.1%, significantly lower than the average growth of 2.6% from 2010 to 2019[30] Group 2: Contributing Factors to Price Decline - The real estate market has seen a significant change in supply-demand dynamics, with real estate investment growth negative for three consecutive years, impacting related industries[42] - Insufficient consumer demand has led to a decline in CPI, with the average consumption propensity dropping to 63.1% in Q1 2025, down from 65.2% in 2019[47] - "Involution" competition in emerging industries has caused prices to drop beyond reasonable levels, with lithium battery prices falling by 39.5% and solar module prices by 29.7% in 2024[52] Group 3: Impact of External Factors - The "tariff war" initiated by the U.S. has negatively impacted export demand, leading to increased domestic supply-demand imbalances and downward pressure on prices[63] - The average monthly increase in pork prices from April 2024 to April 2025 was only 11.3%, significantly lower than previous cycles, reducing its support for overall CPI[36] Group 4: Recommendations for Policy Action - There is a need for stronger macroeconomic regulation to promote reasonable price recovery, including policies to stimulate consumption and stabilize asset prices[63] - Supply-side reforms should focus on eliminating outdated production capacity and encouraging mergers and acquisitions to restore price levels[10]