Currently, international oil prices have fallen off a cliff, the global epidemic is still spreading rapidly, and the risk of economic recession at home and abroad is increasing. At this time, attention should be paid to how to prevent and control the major impact of deflation on the social economy.
As a fossil energy, petroleum is called the “blood of modern industry” and is very important to people’s production and life. Importantly, changes in oil prices are transmitted to various departments through the consumption relationship between input and output, changing the price level of the economic system. Under the influence of the new coronavirus epidemic, we must be more careful to prevent my country’s imported deflation caused by the plunge in oil prices. At present, there are some clues in the CPI and PPI price indexes.
Our country is an oil importing country. The lower the oil price does not mean the lower the cost of the enterprise, the better it is for social and economic development, especially oil-related enterprises, which are more sensitive to price changes. It is relatively sensitive, including PTA and cotton spinning enterprises (there is a certain substitution relationship between chemical fiber and cotton). In 2019, the oil price basically remained at 50-60 US dollars per barrel. Now when the oil price drops to 20-25 US dollars per barrel, product prices will plummet and sales revenue will drop sharply. However, corporate debt is at 50-60 US dollars per barrel. Once the income is significantly reduced, the capital chain will be tight, especially for textile companies, which will ultimately increase the risk of corporate bankruptcy.
The author learned that a large-scale textile company with stable production basically maintains its raw material inventory at 1-2 months. Now with the decline in chemical fiber and cotton prices, companies are purchasing raw materials. The cost of loan interest payments continues to increase, profits from cotton yarn sales continue to decrease, and cash flow becomes increasingly tight, which has put great pressure on the company’s normal production. Especially affected by the epidemic abroad, orders have shown a downward trend. In the future, companies will face a greater money shortage. There is no market for the products they produce, and they have no choice but to pile up in warehouses. This will cause great problems for employment, which will in turn affect the entire domestic market. Some textile companies have already delayed the payment of wages to workers.
At the National Regular Meeting held on March 10, Premier Li Keqiang said, “The impact of this epidemic on our country’s economy cannot be underestimated. But no matter what, we must go all out to stabilize employment . It is not enough to rely on one or two departments to stabilize employment. All relevant departments must put stabilizing employment as their top priority when considering work throughout the year.”
The domestic strong consumer market is supported by residents’ income. If there are problems in the manufacturing industry, establishing a strong consumer market will be like water without a source. Therefore, it is necessary to prevent deflation and take targeted measures to stabilize the manufacturing industry, so that we can calmly deal with the twin shocks of oil and the epidemic. </p
