Abstract:
China has been experiencing the unprecedented CPI & PPI deviation since March 2012. This paper points out the rapidly increasing investment rate owing to the anti-crisis policy is one of the possible explanations. From the demand side, lack of market investment demand during the post-crisis period highlights the role of the consumption demand, resulting in the deviation directly. From the supply side, resource allocation barriers across sectors amplify the deviation. Therefore, it is necessary to implement reforms such as attracting investment from the private sector, restructuring of zombie enterprises, other than the monetary policy to address this challenge.
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