Monday, October 20, 2008

Premier Wan's 10 Economy Saving Measures...




The above announcement is interesting.

The first 3 target on the plummeted farmers and SME in manufacturing and export sectors. However, the first measure will be encountered and even offset by 9 due to the markt structure: small individual farmers, with insufficient subsidies, comprised of the main force and hence are incompetitive in the highly commiditized farming products market. Without sufficient incentive, farmers are either continuing to cheap chemcials to replace natural products or selling their lands to real-estate/manufacturing sector, which in turn will be in conflict with measure 6.

Measure 6 and 7 will again counteract measure 2 and 3. Entrepreuners who have invested in China understand how complicated and heavy and unfair the tax is. The source is the central goverment that wants to save as much money as possible in their own accounts and wants to benefit the state-owned enterprises as much as possible. Besides, environmental regulations are known as a tool of asking money from the enterprises by the municipal and county governments. But, the most important point is: with the declining OECD markets, measure 2 and 3 can only be bandages. The previous tightening on 6 and 7 has already resulted in waves of bankrupcy of manufacturers. It is already too late to start on preserving them (as many of them had cut too deep already).

Measure 10 just walks on the previous steps of US government. And it is apparent that it is against measure 5. If measure 10 is successful, measure 5 is not, and vice versa.

Now, the noticable part is 4: what will the central government do? How much will they invest? Are these investment are for job creations only, or can really improve competitiveness of China? And can with these investment government can improve the supplies side efficiency and hence control 5? Lets pay attention to the forecoming details.

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