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The package announced today, of which 100 billion yuan is earmarked for this quarter, will go toward low-rent housing, infrastructure in rural areas, as well as roads, railways and airports, the State Council said.
The government will also allow tax deductions for purchases of fixed assets such as machinery to stimulate investment, a move that will reduce companies' costs by an estimated 120 billion yuan.
In addition, grain purchase prices and subsidies for farmers will be raised, as will allowances for low-income urban households. The government also scrapped loan quotas to help boost lending to small businesses
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So now china is trying to save itself from the world economic slowdown.
How do you think this will effect (if at all) the U.S. economy in large? Or better yet the world economy?
So now china is trying to save itself from the world economic slowdown.
How do you think this will effect (if at all) the U.S. economy in large? Or better yet the world economy?
not much I would say, the stimulus package is mostly infrastructure investment, this isn't the first time China resorts to massive investment in infrastructure to weather economic downturn, China did exactly the same thing, albeit in much smaller scale, back in late 90s when Asian financial crisis rendered external market environment quite unfriendly, policy like this was proved to be very effective in propping up the economy. But it mainly involves massive building up on roads, train lines, dams, power stations, etc. None of which does China need lots of American products or American expertise (the focus of this time's build-up is reportedly gonna be on improving China's massive railway network, we all know when it comes to railway, Europe and Japan have much better techs and much more experience building it). I suppose China's construction investment would help keep China's raw material import from falling too much, therefore keep export to China by countries like Australia or Brazil on a reasonably acceptable level. As for China's domestic consumption, China clearly has massive manufacturing capabilities to satisfy whatever demand Chinese would have, indeed, one aim of the stimulus, I guess, is to provide a cushion for Chinese manufacturing industry against tanking American&European demand by stimulating domestic consumption.
I don't think American economy would directly benefit that much from Chinese stimulus, although any improvement of overall economic climate would be beneficial. Although some American industries may benefit from more Chinese demand, for example, China may buy more planes from Boeing, China may buy more tech products from major tech companies like IBM, Oracle, etc. Motorola has major major commitment in China, and its operation in China was quite profitable, maybe it can be kept that way. GM has a very profitable joint-venture with Chinese car manufactures manufacturing and selling GM brand cars in China, but GM's main problem is its American operation and it's in too deep a hole to be helped in any significant way by any Chinese stimulus (if GM were to go under, its profitable joint-venture in China might be snapped up by its local partner or some other companies). Unemployed investment bankers on Wall Street might find many opportunities in China, indeed, I heard that China sent a delegation to New York a few days ago to recruit good cheap and desperate investment bankers. All in all, we all know the heart of America's crisis is the collapse of the housing market, unless the federal government open up the immigration gate (lots of rich Chinese want to build second, third, or more homes in multiple countries, they went through political storms before and many of them earned their wealth through not-so-legal channels, building multiple homes and carrying multiple passports are their ways of keeping their option open just in case....), I don't see any major ripple effect of Chinese stimulus package to American housing industry, as a result, US economy would still have to rely largely on itself to sort the mess out.
It could affect us big time. China has been using their money to buy our Treasuries.
Now they may stop financing US debt and use the money to build their own middle class.
It could affect us big time. China has been using their money to buy our Treasuries.
Now they may stop financing US debt and use the money to build their own middle class.
Time will tell though.
Let's hope so. I long for the day when foreigners will no longer buy US debt.
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