During the National People's Congress and the National Committee of the Chinese People's Political Consultative Conference of the Hong Kong SAR, Liu Zunyi, Chairman of CIC International (Hong Kong) Limited, said in an exclusive interview with reporters that the mainland should consider using the issuance of value-protected bonds (also known as value-protected treasury bonds) and agricultural warehousing methods to counteract inflation.

     "Mainland people lack tools to protect themselves against inflation, and value-protected bonds allow retired low- and middle-income earners to avoid risks and spend their twilight years in peace." Liu Zunyi said that value-protected bonds, meaning that the bond is due to repay the capital, can maintain its purchasing power that is the original real value. Its most important feature is that the principal is linked to the inflation rate, when the Consumer Price Index (CPI) increases, the principal amount will be adjusted with the inflation rate. For example, if you buy a $1,000 bond for 10 years, in addition to regular interest payments, at the end of the term the government pays not only the principal amount of $1,000, but also compensation for the loss of purchasing power due to 10 years of inflation.

     "Inflation expectations are more frightening than inflation itself." Liu Zunyi said that if the government can introduce value-preserving bonds, it will show that the government has the determination and ability to control inflation, thus effectively reducing inflation expectations and guiding the people do not have to rush to invest in buying and selling commodities or assets, and it will also be helpful in controlling overheating of prices in the real estate market.

      Liu Zunyi also suggested that, because changes in the weather will affect the harvest or failure of agricultural products, thus affecting the price of agricultural products, while the price of agricultural products itself has a certain degree of cyclicality, the Government can use agricultural products warehousing to stabilize the price of agricultural products. For example, in the year of low prices of agricultural products limited pricing acquisition, storage in warehouses, in the year of high prices of agricultural products released to the market, so as to ensure that farmers in the price of low years to maintain a minimum standard of living, but also in the price of high years to stabilize prices.

     He said that the Government could sign a contract with the farmer, promising to buy a certain amount of the farmer's produce at the contract price after the harvest. At that time, if the market price is higher than the contract price, the farmers can choose not to sell to the government; on the contrary, they can sell the contracted quantities to the government at the contract price. The government can then store the purchased agricultural products in its warehouses and put them on the market when the price is too high to increase supply, thereby calming prices. If the Government has warehouses that can be released at any time, it will also reduce speculation, monopolization, stockpiling, manipulation and other inappropriate market behaviours.

   "This ensures on the one hand that producers have the will to continue supplying and are not affected by short-term low prices, and on the other hand it prevents prices from being too high and protects the rights of consumers. The interests of both sides are reasonably balanced." Liu Zunyi said.

                                                                                                                     Reporter Li Hanfang Ren Qinqin