Since the later half of 1997, negative has continuously been the price index change rate of China for more than twenty months. The unusual phenomenon of declining price since the foundation of PRC has caused a heated debate on deflation, among which the viewpoint that China has been in deflation takes the dominant place. This paper thinks that due to the integration of the global economy, the obscuring of the economic boundaries among countries and the enlargement of the economic systems, there emerge lots of different qualities and characteristics in the economic system.The essential changes lead to the high degree correlation among the country economies, som uch as the policy changes. Therefore the deflation theory based on “single country theory ”have many limitations. Based on the global economic in tegration and a basket of currencies, by selecting different monetary benchmark, th is paper considers the exchange rate of RMB in relation to U S dollar and several other important factors, such as the exchange rate of J apanese Yen, the price of the in ternational crude oil and copper, and the Southeast Asia f inancial crisis. The essential reasons of the price changes in China in recent years are quant ificationally analyzed. Thereby we demon strate that the decline of the price in 1998 and 1999 basically is a normal falling back of price and the fiscal and monetary policies implemented recently to stimulate price do have already taken great effect. Finally, this paper points out the new change of the global economy from the reverse of the trend of several important economic indexes. Finally this paper points out that the newest changes happening to the global economic situation th rough the observation of several critical economic indices’changes. With the aid of the principle of the lag lead of the world economy and our economy, this paper proposes that the in ternational circumstances should be observed carefully and analyzed in depth, and the policy to stimulate the price should be implemented discreetly in the future so as to look for a set of suitable and safe policies.