A new round of nationwide price hikes may have entered the countdown
hit：638 date：2026-03-08
On August 15th, the People's Bank of China released the "Report on the Implementation of China's Monetary Policy for the Second Quarter of 2025".
Everyone can guess roughly by the name, and this report is released quarterly, which is far from rare.
But unexpectedly, there was a statement in the report that immediately attracted widespread attention upon its release——
According to the domestic and international economic and financial situation and the operation of financial markets, we should grasp the intensity and pace of policy implementation, maintain sufficient liquidity, match the expected goals of economic growth and overall price level with the scale of social financing and the growth of money supply, and continuously create a suitable financial environment. Promoting a reasonable rise in prices is an important consideration for grasping monetary policy, and pushing prices to remain at a reasonable level
This is equivalent to setting the overall tone for monetary policy in the coming period.
After hearing this, many friends were filled with question marks:
Isn't it a good thing to bring down prices? Why do we have to raise prices? We're not following the rules this year
Old Tie who has this idea has a narrow knowledge!
Next, let's explain in plain language what this is all about——
The price of a product is determined by the game between millions of sellers and millions of buyers, and condensed into the supply and demand relationship.
The high or low price will automatically filter the urgency of demand. A sharp increase in price indicates strong demand, and vice versa.
If a product is trapped in a long-term price war, the profit margin of the production end will inevitably be compressed, and in this case, the demand for upstream raw materials by manufacturers will also decrease accordingly;
As soon as consumers look at this situation, a wait-and-see attitude will arise, followed by a chain reaction of credit congestion, employment opportunities, and fiscal profits and taxes
For the entire economic chain, a low price level does not necessarily benefit consumers.
Think about it, the Cadillac priced at 150000 yuan and the Jaguar priced at 130000 yuan have both fallen into this bear shape, and they haven't sold well yet. The car companies behind them are scratching their hearts, and that's why.
From a global perspective, the CPI in July shifted from a decrease to an increase on a month on month basis, rising by 0.4% and remaining unchanged year-on-year, which is indeed a relatively positive signal;
However, looking at the overall performance in the first seven months of this year, it is indeed necessary to make greater efforts to achieve the expected annual growth target of 2%.
In fact, in recent months, our policy efforts have been focused on this main task——
In May, the central bank decided to establish a 500 billion yuan service consumption and elderly care re loan to incentivize and guide financial institutions to increase financial support for key areas of service consumption such as accommodation, catering, cultural and entertainment, education, and the elderly care industry.
In June, the senior management issued the "Guiding Opinions on Financial Support to Boost and Expand Consumption", which clearly stated the need to guide financial institutions to strengthen financial services from both the supply and demand sides of consumption, meet the diversified financing needs of various entities, promote the expansion of high-quality consumption supply, and help unleash the potential for consumption growth.
At the end of July, the national childcare subsidy plan was announced, which means that children under the age of 3 can receive 3600 yuan per year. Essentially, it is a targeted consumption voucher issued with the aim of encouraging and stimulating childbirth.
After entering August, the decision-making level released a policy of interest subsidy for loans in the consumer sector, which actually increased financing support from both the consumer demand side and the enterprise supply side.
The latest report on the implementation of China's monetary policy in the second quarter of 2025, released by the People's Bank of China, has put forward a targeted plan for the next stage of monetary power:
Implement a moderately loose monetary policy, ensure the implementation of various monetary policy measures, strengthen countercyclical regulation, and grasp the intensity and pace of policy implementation according to the domestic and international economic and financial situation and financial market operation
To break it down, the faucet of currency will continue to turn on, but precise drip irrigation should be used instead of flood irrigation to reduce bank debt costs and promote a decrease in comprehensive social financing costs.
The focus of "implementing and refining" and "implementing well" is on structural monetary policy, allowing money to truly flow into the capillaries of the real economy.
In addition to the consumer sector, there are also core areas that we often mention, such as small and medium-sized enterprises, science and technology innovation, green, and people's livelihood.
These departments are deeply related to employment, and when the employment indicator becomes hard, the series of combination punches we have fought before will take effect.
From the perspective of a bank, there is definitely motivation to do so!
Let's take a look at two sets of data——
As of the end of June, the stock of social financing scale and the broad money supply (M2) increased by 8.9% and 8.3% respectively year-on-year, and the balance of RMB loans was 268.6 trillion yuan.
During the same period, the balance of RMB deposits was 320.17 trillion yuan, a year-on-year increase of 8.3%. In the first half of the year, RMB deposits increased by 17.94 trillion yuan, of which household deposits increased by 10.77 trillion yuan.
Behind the lower growth rate of M2 compared to social financing, there is more emphasis on the issuance of special bonds, while corporate financing remains relatively weak;
On the other end, ordinary people are still actively saving money, and dismantling the barrier lake remains a top priority.
The central bank's "report" clearly states that "promoting a reasonable rebound in prices is an important consideration for grasping monetary policy".
This means that our monetary policy goal is to bring CPI and PPI back to a sustainable positive growth range.
Maintaining CPI between 1-3% would be an ideal state.
From the perspective of the financial sector, its essence lies in maintaining moderate easing and implementing the "anti involution" policy in the financial sector.
The M2 growth rate we mentioned earlier is lower than the social financing growth rate, which reflects nothing but——
Funds are idling within the financial system, and there is a market preference for pursuing low-risk assets, as well as being cautious in lending to small and medium-sized enterprises and weak areas.
After fermentation over time, it will inevitably lead to difficulties in effectively entering the capillaries of the real economy, thereby creating effective supply and employment.
In other words, the internal competition on the financial side has essentially driven the internal competition on the physical side.
To break this cycle, it will inevitably be accompanied by the next stage of higher quality monetary easing, which is a systematic project.
This is consistent with the credit policy statement in the report, which has shifted from "increasing investment efforts" to "stabilizing support efforts".
Currently, the net interest margin of the banking industry has been below the warning line of 1.8% for several consecutive quarters.
From the perspective of maintaining the profitability of the financial industry, the possibility of further promoting comprehensive interest rate cuts in the short term is relatively limited.
However, at the same time, it is entirely feasible to further reduce policy interest rates such as MLF rates, reverse repo rates, and reserve requirement ratios in order to lower social financing costs.
The MLF rate and reverse repo rate mark the cost for commercial banks to obtain short-term funds from the central bank, and are the pricing benchmarks for LPR.
Pushing down the two policy interest rates mentioned above is actually reducing the debt cost of banks.
On the other hand, a decrease in the reserve requirement ratio means an increase in the size of banks' loanable funds and the release of liquidity.
The above operations are actually aimed at effectively reducing the pressure on the bank's liability side, hedging against the pressure of lower net interest margins, and providing favorable conditions for expanding the release of low-cost funds.
Of course, for the real economy and consumer end, using sufficient financial liquidity as a policy foundation is only a major prerequisite.
Secondly, structural tools will continue to be used to fully implement precise drip irrigation.
The mission of structural tools is mainly threefold:
Targeted injection of liquidity, reduction of financing costs in specific areas, and optimization of credit structure.
Its core purpose is to more accurately activate the demand and supply of weak links in the economy, thereby promoting a moderate rebound in prices.
Re loans that support agriculture, rural areas, and small and medium-sized enterprises, mortgage supplementary loans (PSL), and re loans that support green industries and technology all belong to this type.
It is worth noting that in the past decade, the structure of credit allocation in China has undergone profound changes——
In 2016, loans in the real estate and infrastructure sectors accounted for as much as 60%, and by 2025, loans in technology, green, inclusive, elderly care, and digital finance will account for about 70%.
That is to say, the main driving factors have shifted from heavy asset industries to high-quality development areas.
And these fields are highly likely to contribute new growth points and employment opportunities for the next stage of development.
This is actually the source of vitality brought by structural tools, completing the entire process of transmission from the financial sector to the real economy and then to the employment sector.
It can be foreseen that the above-mentioned structural tools are highly likely to continue to exert force in the next stage.
For example, the 500 billion yuan service consumption and pension refinancing mentioned earlier cannot rule out the possibility of further increasing the dosage and providing greater financial support to promote consumption in relevant key areas.
Thirdly, strengthen policy coordination and cooperation to enhance residents' consumption ability and willingness.
In recent times, it can be regarded as a concentrated period of mutual efforts between finance and currency.
For example, recent childcare subsidies, consumer loans, and interest subsidy policies for service industry operators are actually manifestations of the coordinated efforts of finance and currency.
Especially under the "two subsidies" policy, a multiplier effect of 10 times is highly likely to unleash trillions of consumption potential, achieving a qualitative change from loose monetary policy to loose credit.
Not long ago, some part-time graduate students at Central South University of Forestry and Technology received admission notices with mixed feelings.
They were surprised to find that not only had tuition fees increased, but some majors had also doubled in price!
For example, the tuition fees for majors such as tourism management and engineering management have been increased from 14000 yuan per year to 28000 yuan per year.
Faced with doubts from all parties, the school responded:
The tuition fee increase has gone through the process of research, cost estimation, and superior filing, and the increase is in accordance with the Xiangfa Gai Jia Fei Gui [2023] No. 262 document. The adjustment process is strictly compliant
Looking at the whole country, it is not just Central South University of Forestry and Technology that has recently raised tuition fees!
Yunnan Normal University, North China University, Shanxi University of Finance and Economics, Shanxi Agricultural University, Jianghan University, Nanjing Media College, and Beijing Jiaotong University (Weihai Campus) have all seen tuition fees increase by 20-50%.
Objectively speaking, the college tuition fee of around 5000 yuan per academic year, which we have long been accustomed to, is more like a product of a specific historical period;
But now, under the background of long-term price suppression and the continuous rise of rigid costs such as teaching staff, equipment, and maintenance, as well as the constant pressure on local finances, fatigue has emerged.
And the central bank's clear declaration of "promoting reasonable price recovery" as the priority goal of the next stage of monetary policy is like opening the prelude to systematic adjustment——
The policy orientation of "promoting reasonable price recovery" essentially provides policy endorsement and operational space for necessary price reassessment in the public service sector that reflects real costs.
For example, allowing tuition fees to be moderately increased is not only a practical choice for universities to make up for the insufficient financial allocation, but also to improve the quality of teaching and research, and more importantly, to reshape the market's expectations of the overall price level.
However, the increase in tuition fees in universities is probably just the tip of the iceberg. We are likely to see more public service sectors experiencing a wave of price increases, including but not limited to:
Key aspects of people's livelihood such as healthcare, transportation, water and electricity, and gas.
We have also discussed the stories behind the price increase of the above-mentioned categories in our previous drafts.
All of this is likely to be an inevitable and interconnected phenomenon as the economy recovers.
The reality that must be accepted now is that a "reasonable rebound" in prices is not only the goal of the central bank, but will also become a reality in the near future.
But as a key factor in breaking the current situation, overall the benefits outweigh the drawbacks.
