Comments on: China’s Stimulus Plan Is No Such Thing

By: sinomania

sinomania — Tue, 11 Nov 2008 18:03:29 +0000

So we effectively nationalize our biggests banks, insurance, auto companies but China is the “communist” “command economy”? These are outdated buzz words. Your sources — the WSJ and the Heritage Foundation — are indicitive of old school bias.

The private sector now accounts for around 2/3 of the Chinese economy. There are 10 specific points of government investing in the stimulus package from directly building housing and infrastructure (roads, railroads) to subsidizing research centers to tax-reduction initiatives for indivuals and businesses. On the latter Morgan Stanley says:

… the impact of VAT conversion [from production to consumption base] will likely be quite significant. We estimate that the potential aggregate tax savings for the VAT-paying enterprises as a result of this policy change could be in the range of Rmb150-200 billion in 2009, or about 0.5-0.7% of GDP. The sectoral impact varies, depending on the share of machinery and equipment purchase in total fixed-asset investment for each sector.

There is a lot more to China’s stimulus than just a shell game.

By: sinomania

sinomania — Tue, 11 Nov 2008 17:41:55 +0000

Where are you getting your facts on China? The CIA factbook? Old copies of TIME magazine?

The private sector accounts for close to 2/3 of China’s economy now. “Communist” “Command Economy” “5 Year Plan” — these are all buzz words, propaganda. China’s economy most closely resembles Germany and both officially describe themselves as a “socialist market economy”.

The stimulus plan includes important tax-reduction initiatives to benefit private companies and individuals, particulary changing the VAT, giving businesses significant tax savings.

There are 10 specific areas of investment in the stimulus package – from building rural housing to subsidizing research centers – if you seriously interested in this topic you could easily find this information.

By: DL

DL — Tue, 11 Nov 2008 17:34:46 +0000

FXI was a nice short yesterday. Probably still a good short.

By: Mike in Nola

Mike in Nola — Tue, 11 Nov 2008 17:09:44 +0000

Here’s an opinion from someone living and teaching in Bejing. Seems to have credentials and most of wha the has said in the past was credible. Down at the bottom of the blog page is an RSS link:

http://piaohaoreport.sampasite.com/china-financial-markets/blog/The-RMB-4-trillion-fiscal-packag.htm

By: Pat G.

Pat G. — Tue, 11 Nov 2008 15:41:16 +0000

Yesterday, when the DOW was up 200 points the talking heads on CNBC attributed it to the Chinese stimulus plan and the benefit that plan would provide to the global economy. Later as the rally faded that was attributed to the realization that if the Chinese were putting $600B to work in infrastructure then that money wouldn’t be available to buy our debt. How pathetic!

By: Greg0658

Greg0658 — Tue, 11 Nov 2008 15:33:43 +0000

jmborchers @ Nov 11 2008 at 7:39 am
Actually … me thinks your wrong and its time America starts reverse engineering the Asian way of doing business before its to late

what if they nationalize our 1/2 flying flag factories after a satellite shoot down war and launch an air bourne ranger landing with Boeing transports
NOT really probable (but possible)
(China if I were you I’d checkover the transports from one end to the other)(damn thats un-American of me)

Of course a hexi century age old culture will need the factorys ready to provide internally. The measures to watch for are internal component manufacturing vs external import sales. Internal natural resource mining vs external import sales and stockpiles starting.

I am left wondering whos flag is playing us Americans? Is the Revolutionary War won and over? I think it never is in Capitalism.

By: MikeDonnelly

MikeDonnelly — Tue, 11 Nov 2008 15:12:51 +0000

interesting take, for example how much did the Olympics cost? well that spending is now off the table and perhaps this plan just replaces it, so net-net not much change from a Keynesian persective. it’s not to say that the Chinese cannot increase G spending, it’s just in a command economy we don’t know how much they would have spend otherwise.

By: Archiphage

Archiphage — Tue, 11 Nov 2008 15:04:38 +0000

for BR:
Isn’t that just the difference between a burglar who robs homes on Millionaire’s Row instead of Skid Row? Mismanaging the world’s reserve currency just means there are that many more pockets to pick. Or to use your metaphor, the US just has more pieces to move around a larger board than do the Chinese… not that either player is capable of making more pieces.

By: jmborchers

jmborchers — Tue, 11 Nov 2008 15:02:50 +0000

I’m all changed over. Let’s see how she goes.

By: dead hobo

dead hobo — Tue, 11 Nov 2008 15:02:36 +0000

China is reported to be spending massive amounts of this money on infrastructure, as opposed to the US way of stimulus, which involves bookie bailouts using newly printed money. Credit in China is being loosened so that lenders can be more generous in rural China. I guess this is what happens in a well run and relatively efficient economy.

The difference between us and the Red Menace is that they spend on things and people, similar to FDR and the New Deal. We live on borrowed money, make Hail Mary plays in the hope that unlimited credit will ultimately generate tax revenues, use the borrowed money to create bigger pools of borrowed money, and base this stupidity on Republican ideology, an uncritical media, and half witted academics. Thieves just saw an opportunity and did what came naturally. In a sense you can’t really blame the crooks.