Among the above four kinds of inflation, structural inflation should have been the main reason for China's inflation. Because we are in the accelerated period of economic modernization, with the advantages of technology introduction and learning effect, the labor productivity of industrial sectors has increased rapidly, and the corresponding labor productivity of agriculture and service industries (including government departments), especially service industries (because China's agricultural productivity has also increased very rapidly in the past two decades), has increased slowly, which will inevitably lead to higher wage growth in agriculture and service industries than its output. Although the CPI index reflecting inflation may be mainly caused by rising food prices, the main reason for our current round of inflation is demand-driven, not caused by structural changes in the economy. Because in the late 1990s, after the East Asian financial crisis, we continued to implement the policy of stimulating demand, especially domestic demand. Of course, so far, domestic demand, especially the most important consumer demand, has not been driven, and its proportion in GDP is getting lower and lower, which has only driven investment, government purchases and net exports, leading to overheating and imbalance in the economic structure.
According to Keynesian theory, in the period of economic depression or economic contraction, fiscal policies to expand demand should be implemented, including increasing government expenditures (government purchases and transfer payments), reducing taxes or implementing investment subsidies. Demand consists of consumption demand, investment demand, government purchase and net export (external demand). For a long time, the main problem in China is insufficient consumer demand. With the monopoly of state-owned resources and key industries, the income distribution gap is too large and the income of the vast majority of residents is too low, it is difficult to stimulate consumer demand. The most effective way to stimulate consumer demand is to increase transfer payments (especially to establish basic social security) and reduce taxes. However, in the late 1990s, the policy of expanding domestic demand did not choose to reduce taxes and establish social security. Instead, the residents are forced to increase their consumption expenditure by increasing their expenditure items and lowering the deposit interest rate. In addition, it has implemented a consumer credit policy (installment payment and mortgage loan system for housing, automobiles and other bulk consumption). The policy of increasing residents' expenditure items is mainly reflected in the three reforms of medical care, housing and education (college fees and enrollment expansion), which is essentially that the government gives up its welfare responsibility. However, these reforms will not only stimulate residents' consumption demand, but will curb residents' consumption. Because in the case of no increase in income, the increase in expenditure, especially the increase in expected expenditure in the future, will make residents' budgets more tense, thus tightening consumption.