China's economy will probably grow by about 8 per cent this year, the central bank's research bureau forecast on Tuesday, the latest in a string of relatively optimistic estimates. Some analysts have predicted a much sharper slowdown for the world's fourth-largest economy, to as little as 5 per cent, as factory output growth grinds to a halt and exports shrink from their year-earlier levels.However, government officials and researchers have centred around the view that China can engineer growth of about 8 per cent this year -- the pace officially targeted by Beijing as what it considers necessary to create enough new jobs.
Some analysts have predicted a much sharper slowdown for the world's fourth-largest economy, to as little as 5 per cent, as factory output growth grinds to a halt and exports shrink from their year-earlier levels.
However, government officials and researchers have centred around the view that China can engineer growth of about 8 per cent this year -- the pace officially targeted by Beijing as what it considers necessary to create enough new jobs.
The research bureau of the People's Bank of China (PBOC) added its voice to that consensus, saying in a report that they expect a relatively modest slowdown from their estimate of 9.3 per cent growth for all of 2008. The economy expanded by 9.9 per cent from a year earlier in the first nine months of 2008.
Over the past, say, 20 years China's annualized GDP rate has ranged 7% - 10%. By contrast, Bloomberg reporting on Q4 factory orders implies the value and volume of US domestic exports is an accurate indicator of further decline in economic activity, including import consumption.
The U.S. economy contracted at a 0.5 percent annual rate in the third quarter [?], the Commerce Department said Dec. 23. The economy probably shrank at a 4.3 percent annual rate in the last three months of 2008 [?], the biggest contraction since 1982, according to the median estimate of 51 economists surveyed last month by Bloomberg.
Inexplicably, the FRB had forecast a safe bet GDP growth 1.3% - 2.0%. Rather than "wealth" lost and a negative rate of change in GDP to accommodate a liquidation of financial sector contributions, at least, to it. Since the FRB counts on money supply manips to inflate GDP value anyway. (See WTO, 2000 - 2007. So much for factor analysis.) Oops.
Unlike Westworld however, China is sitting on a HH "savings glut" in its own currency which will undoubtedly be managed to replace foreign direct investments and nondurable goods spending. (This much I figured from Shanghai road-shows several years ago.) Concern trolls of Europa will worry about China's inflation targets --which they cannot determine-- as its key sectors have been closed to ForEx arbitrage. Oh, and securities "transparency."
Henry Liu posed an interesting question, China's inflation-free route from crises, just two weeks ago as if anticipating the geopolitical alarm of the G7. I take it, the PRC is positioned to reinvent government bonds.
The solution to this structural problem can also be summed up in one sentence: China must finance plants with sovereign credit to produce for the domestic market where consumer purchasing power will come from high wages, with sovereign credit repaid from increased tax revenue from a vibrant domestic economy. ... For China, the only viable strategy is to shift these bankrupt export factories in the coastal regions toward the domestic market. But the domestic market at present is too weak in consumer demand due to low wages to absorb the overcapacity in export. Thus no funds are available in private credit and capital markets to finance urgently needed restructuring of the export sector on a national scale. Market forces are simply not up to the task. To kick-start a new economic strategy of shifting the Chinese economy from export dependency to domestic construction, the Chinese government needs to establish a Commission to Restructure the Chinese Economy (CRCE) as a special agency in the State Council under the direct control of the office of the premier, with emergency powers to deal with the unemployment fallout from the sudden collapse of the export sector that will soon threaten social stability. The proposed CRCE should have full authority to formulate and implement a national economic recovery program with appropriate and adequate credit-creation power to finance an urgently needed recovery to provide full employment at high wages. Equally importantly, the CRCE must have full government authority to commit unconditionally to the timely repayment and retirement of this temporary debt created by sovereign credit. ... The financial institutions accepting the work-creation certificates can treat such certificates as commercial paper that can be discounted at commercial banks, which in turn can discount them at the People's Bank of China, the central bank. The process would provide the needed liquidity to facilitate the payment of wages outside the range of the government's fiscal budget. The CRCE would undertake to redeem one fifth of all work-creation certificates issued through the central bank as the economy and tax revenue recover and expand. As collateral for the certificates, the Finance Ministry would deposit in the central bank a corresponding amount of tax vouchers good for paying taxes. As the Ministry of Finance redeems work-creation certificates, the tax vouchers would be returned to the Finance Ministry.
For China, the only viable strategy is to shift these bankrupt export factories in the coastal regions toward the domestic market. But the domestic market at present is too weak in consumer demand due to low wages to absorb the overcapacity in export. Thus no funds are available in private credit and capital markets to finance urgently needed restructuring of the export sector on a national scale. Market forces are simply not up to the task.
To kick-start a new economic strategy of shifting the Chinese economy from export dependency to domestic construction, the Chinese government needs to establish a Commission to Restructure the Chinese Economy (CRCE) as a special agency in the State Council under the direct control of the office of the premier, with emergency powers to deal with the unemployment fallout from the sudden collapse of the export sector that will soon threaten social stability.
The proposed CRCE should have full authority to formulate and implement a national economic recovery program with appropriate and adequate credit-creation power to finance an urgently needed recovery to provide full employment at high wages. Equally importantly, the CRCE must have full government authority to commit unconditionally to the timely repayment and retirement of this temporary debt created by sovereign credit. ...
The financial institutions accepting the work-creation certificates can treat such certificates as commercial paper that can be discounted at commercial banks, which in turn can discount them at the People's Bank of China, the central bank. The process would provide the needed liquidity to facilitate the payment of wages outside the range of the government's fiscal budget.
The CRCE would undertake to redeem one fifth of all work-creation certificates issued through the central bank as the economy and tax revenue recover and expand. As collateral for the certificates, the Finance Ministry would deposit in the central bank a corresponding amount of tax vouchers good for paying taxes. As the Ministry of Finance redeems work-creation certificates, the tax vouchers would be returned to the Finance Ministry.
That or circulate scrip in the fashion of Lincoln. To fund employment and wages, ergo demand for domestic investment and consumer goods that is not dependent on consumer credit creation by bankers. Gee. Diversity is the key to economic and political evolution.
