My comment: I have defended since one yea ago hat we should not grow above 7.5%, 8% max. Basically because its the natural growth of our economy right now. There are ways to sustain employment, wellbeing, etc. temporarilly such as higher social salaries, education programs for unemployees, higher investments in healthcare, education, etc. they are the best way to support our long term growth.
The infraestructure stimulous pack that government putted in place is great as well, social programs and infraestructures complement each other. Also to ease lending through banks and other financial institutions as government did is required to deploy the stimilous pack and to push consumption higher. But once we saw around summer that we can reach easily the aim, 8% more or less, in my opinion we should have refrained credit. To regulate credit in order to avoid foreclosures, to avoid speculation, etc. as government did is not enough. The problem is not where those aditional funds go, the problem is that they mean excess of liquidity in our economy. Some people will say that those funds are going abroad, mostly to ASEAN, Middle East and Japan, Korea. That is true, yet it is a problem and will create price inflation in China, and abroad later. Because those funds, sooner or later will return. And problaby they will return exactly when we will not want them, when economy will be growing above 10% and CPI will be above 5% again. I can understand that they are crucial to help economies in the area because only China could make credit to grow through state owned banks. But also, we have to remember that China as a fast growing developing economy is very sensitive to price inflation. I do not know the deflactor of real growth (not just nominal) per percentage point of price inflation. I guess it must be around 1.3 or 1.4 or so. It means that if this excess of liquidity drags 1% of price inflation, in real terms our economy in 2010 or 2011 will grow 1.3 or 1.4 percentage points less than its potential. If it grows 10% in 2010, it real potential could be 11.3% or 11.4%. But even worse. As a nation we have to raise added value to our goods and services as much as we can. Professional education is crucial to sustain current workers, if not, as economy grows in percentage and in value, many workers will not be able to remain in the work market because lack of professional skills. I do no want to make a drama of this issue. I think that we did "almost perfect", I mean during this crisis we could do it even better. The deep reason of this message is that after some meetings and readings in summer, I believed that authorities would address this issue as I, and more and more economists in China too, suggested. I was wrong, they did not change their policy, at least not yet. I guess it is politics. Other countries in the Pacific rim and Asia need it more than we do. The good news is that most economies in Asia exited alrady or are close to exit this crisis. Peace and best wishes. Xi --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
