25.11.08

The People's Money

While I was in China last week, all the (English language) local news was zoomed in on China's economic stimulus package.  I'll write more about what the Chinese government is doing to stimulate the IT sector of their economy later today, but a few things were interesting to me, from a macro-economic perspective:
  • China apparently seeks to achieve something like balanced trade with the US.  According to my hosts this is more a matter of treaty than of policy.  Plus, the Chinese government has a lot of money sitting on the sidelines, so they actually need to spend.  Again according to my host, and independently verified with a bit of research and my own observations, one of the only things the Chinese government (and state supported industry) is able to buy in America is big civilian airplanes.  So, there are a lot of Boeing jets on runways in China.
  • Their internal stimulus package announced a couple of weeks ago was billed as a placating measure in their local press reports...  Apparently the People are not so happy with "slow" growth, even when that "slow" growth would look healthy by our own economic standards.
  • That's because of habituation.  The average rate of economic growth in China over the last 20 years has been over 10%, making it the fastest growing major economy in the world.
  • ... and on that front, this article from Financial Times is an interesting projection of what the recent downturn is likely to do to China:
The World Bank on Tuesday cut its growth forecast for China next year to 7.5 per cent, the slowest rate of expansion since 1990, and said the impact of the global financial crisis was likely to “intensify”.

The interesting thing about this is that China's plans to forestall the slowdown involve turning attention to domestic consumption, away from exports.  That means China, the world's workshop, is about to start shopping itself...



No comments: