Chinese Inflation And Deflation Cyclical

Since the beginning of reform and opening policy, China has went through several times of inflation and deflation, facing the alternate reality of inflation and deflation, the traditional policy tools is obviously insufficient and invalid. In inflation, a macroeconomic policies, such as raising interest rates or credit contraction, which is intended to combat asset prices rising, the effect of shrinkage on asset prices is not obvious, but causing a great blow to the real economy sector competitiveness, lead to a lot of the real economy enterprise capital chain rupture or even bankruptcy. The expansionary economic policy in the face of deflation, which is intended to stimulate the real economy competitive power to help the real economy went through the economic crisis, but come to the result that many entities in the economic capital flows in asset markets, causing the price of real estate go through a substantial raise, and the original intention of helping the poor real economy sector comes to a disappointing result. Government,effected by the new Keynes doctrine, frequently use fiscal policy and monetary policy intervention in the economy, but the effect of ironing the economic fluctuation is not just as one wishes.This paper, from the Chinese economic system, method of logical deduction, reality of china economy, studies the mechanism of inflation and deflation cycle in the economic system.This paper studies the development and evolution of economic, and come to the belief that distortions in the economic system was born in leaps and bounds strategy conclusions. The distorting effects of the economic system under the Chinese economic situation of excess liquidity and excess capacity exists at the same time, insufficient domestic demand and investment over these two characteristics under the influence of China to some extent, there is a ten-year economic cycle fluctuations, this cycle along with the alternating cycle of inflation and deflation. Insufficient domestic demand and investment caused by excessive production capacity increased demand in the period of deflation. Government usually promote a large number of productive investment, to overcome the lack of demand under conditions of deflation, and there have been10years after production capacity created by the release of the inflationary consequences. In this paper, the evolution of the economic system are followed by this pattern:environment-thoughts-Strategy- the result, and then the result will impact the environment, causing the environment deteriorating or improving. This paper studied the unique ways of the operation of the Chinese economy, and the risks in the open economy. Considering the actual operating process to eliminate distortions in the economic system may cause short-term decline in demand, the paper argues that with the short-term depreciation of the RMB exchange rate to eliminate the economic legacy of the planned economy system distorted.