Sunday, November 9, 2008

The 10 Saving Measures of China

From New China Agency:

温家宝主持召开国务院常务会议 研究部署进一步扩大内需促进经济平稳较快增长的措施

新华网北京11月9日电
国务院总理温家宝5日主持召开国务院常务会议,研究部署进一步扩大内需促进经济平稳较快增长的措施。
会议认为,近两个月来,世界经济金融危机日趋严峻,为抵御国际经济环境对我国的不利影响,必须采取灵活审慎的宏观经济政策,以应对复杂多变的形势。当前要实行积极的财政政策和适度宽松的货币政策,出台更加有力的扩大国内需求措施,加快民生工程、基础设施、生态环境建设和灾后重建,提高城乡居民特别是低收入群体的收入水平,促进经济平稳较快增长。
会议确定了当前进一步扩大内需、促进经济增长的十项措施。

一是加快建设保障性安居工程。加大对廉租住房建设支持力度,加快棚户区改造,实施游牧民定居工程,扩大农村危房改造试点。

二是加快农村基础设施建设。加大农村沼气、饮水安全工程和农村公路建设力度,完善农村电网,加快南水北调等重大水利工程建设和病险水库除险加固,加强大型灌区节水改造。加大扶贫开发力度。

三是加快铁路、公路和机场等重大基础设施建设。重点建设一批客运专线、煤运通道项目和西部干线铁路,完善高速公路网,安排中西部干线机场和支线机场建设,加快城市电网改造。

四是加快医疗卫生、文化教育事业发展。加强基层医疗卫生服务体系建设,加快中西部农村初中校舍改造,推进中西部地区特殊教育学校和乡镇综合文化站建设。

五是加强生态环境建设。加快城镇污水、垃圾处理设施建设和重点流域水污染防治,加强重点防护林和天然林资源保护工程建设,支持重点节能减排工程建设。

六是加快自主创新和结构调整。支持高技术产业化建设和产业技术进步,支持服务业发展。

七是加快地震灾区灾后重建各项工作。

八是提高城乡居民收入。提高明年粮食最低收购价格,提高农资综合直补、良种补贴、农机具补贴等标准,增加农民收入。提高低收入群体等社保对象待遇水平,增加城市和农村低保补助,继续提高企业退休人员基本养老金水平和优抚对象生活补助标准。

九是在全国所有地区、所有行业全面实施增值税转型改革,鼓励企业技术改造,减轻企业负担1200亿元。

十是加大金融对经济增长的支持力度。取消对商业银行的信贷规模限制,合理扩大信贷规模,加大对重点工程、“三农”、中小企业和技术改造、兼并重组的信贷支持,有针对性地培育和巩固消费信贷增长点。

初步匡算,实施上述工程建设,到2010年底约需投资4万亿元。为加快建设进度,会议决定,今年四季度先增加安排中央投资1000亿元,明年灾后重建基金提前安排200亿元,带动地方和社会投资,总规模达到4000亿元。
会议要求,扩大投资出手要快,出拳要重,措施要准,工作要实。要突出重点,认真选择,加强管理,提高质量和效益。要优先考虑已有规划的项目,加大支持力度,加快工程进度,同时抓紧启动一批新的建设项目,办成一些群众期盼、对国民经济长远发展关系重大的大事。坚持既有利于促进经济增长,又有利于推动结构调整;既有利于拉动当前经济增长,又有利于增强经济发展后劲;既有效扩大投资,又积极拉动消费。要把促进增长和深化改革更好地结合起来,在国家宏观调控下充分发挥市场对资源的配置作用;发挥中央和地方两个积极性。
会议强调,尽管我们面临不少困难,但我国内部需求的潜力巨大,金融体系总体稳健,企业应对市场变化的意识和能力较强,世界经济调整为我国加快结构升级、引进国外先进技术和人才等带来新的机遇。只要我们及时果断采取正确的政策措施,把握机遇,应对挑战,就一定能够保持经济平稳较快发展。

In appearance the plan looks grand. However, plan 7 has to be done no matter under what circumstances. Plan 2 and 8 target on improving securities to town's residents and farmers for narrowing the income gap and stablizing these people. They are more political than economical. So is plan 1 for the root class in big cities. Plan 4 is for social welfare purpose and hence political stability. Plan 6 is vague; it is more than obvious that Central Government has no ideas on how to do with high tech development.

On the other hand, plan 3 has already been launched before the financial turmoil. And as they are large scale infra-structural projects, they cannot be speeded up at will. More money may put to raise more projects and create more opportunities. Although these projects can improve the hardware economic efficiency and effectiveness of the country, the main aim is more on creating jobs to prevent citizens from going mad and riot due to unemployment. Plan 1, 2, and 5 have similar properties. The Net Present Values of these projects are on questions.

The more substantial plan is plan 9 which can help ease the real core deal: the closing of production facilities due to liquidity and heavy taxation. Nevertheless, even if they can pass over the toughest liquidity period, whether or not they can stand a chance in 2-3 year period of time is subject to queries. Afterall, the GDP drops due to OECD economic recession is too large for domestic consumption to offset. Plan 10 can work with plan 9 to provide bandages to the current doomed manufacturing industry.

Nonetheless, for the manufacturing industry, even with such a large scale of bailout plan, they may not be really able to survive. We can perform a simple calculation as below:

For simplicity, and as according to recent roundup GDP figures (in USD): US GDP is 12t; EU is another 12t; Japan is 4.5t; Total = 12t + 12t + 4.5t = 28.5t.

GDP by consumption takes about 70% of total GDP; so it is 28.5t x 70% = 19.6t.

Assume in the following year the OECD will experience a drop of 2% on total GDP; evenly distributed to every sector, thus, the drop of GDP on OECD consumption will be 19.6t x 2% = 0.392t.

Now, China's Total GDP is 2.4t, with 39% on export = 0.936t. Assume China export only take 40% of the pie of the consumption GDP of OECD countries. Thus, the drop of consumption GDP of OECD countries that will affect China will be 0.392t x 40% = 0.1568t. It means a reduction of 0.1568/0.936 = 0.1675 or 16.75% of export GDP of China. It is a lot.

As China's domestic consumption GDP is 40% of total GDP, i.e. 2.4t x 40% = 0.96t. In order for the domestic consumption to completely take over the decline of the pie on export manufacturing it will be an increase of domestic consumption by 0.1568/0.96 = 0.1633 or 16.33% .

Take another point of view. There are about 400m citizens living in the big cities that are the core consumption force. To spread the increase of 0.1568t to 400m people, it means 156,800m/400m = 392USD/year additional consumption. With the average annual income at 2000USD, it means they need to have a minimum increase of after-tax salary by 392/2000 = 0.196 or 19.6% next year in order to completely offset the lost of GDP from overseas. Under the current economic environment, how can it be done?

1 comment:

Viola said...

I like the calmness before government's calculation.