Predictions about China Large Fiscal Stimulus

Government of China has announced the ten-stimulus plan on 9 Nov 2008 that will provide 4-trillion yuen (about US$586 billion) investment on infrastructure, low-cost housing, supporting rural villagers and reduces tax. The purpose is to ensure the eight percent growth rate in 2009. Some analysts said it was unneccessary since there was no financial problem happening in China. Simply the situation is not the same as in US. Some said it was good to have. Of course, in any case, you will say no, if someone buy you lunch.

These are predictions made by 林行止 today in Hong Kong Economic Journal on 11 Nov 2008.

第一、國際市場多項商品期貨的價格，必然由於國內再加大基建規模令需求大增而上升（油價聞聲升百分之三點八、黃銅升百分之八），那些內地有出產及生產的，因為本地需求轉殷、出口量下降，國際價格自然上揚；而若干內地無所出而必需從國際市場購買的，在供應不可能突增的條件下，價格亦必然攀升。值得注意的是，在眾多僅僅於三數個月前金融海嘯未至時供應管道出現嚴重的所謂「瓶頸問題」一度令價格飛漲的商品，其價格極可能在衰退陰影下再次飛躍。這種很快便會顯現的價格趨勢，為快將出現的通脹打好再度肆虐的基礎。

Point 1: Price of goods will rise again due to increase of demands. Although there is recession, trend of price is increasing and this establishes a ground for inflation.

第二、大量投入，可望維持失業率於「可接受」水平，內地的消費市場應該好轉，因為投入產生的乘數作用會推動總體經濟發展；今年第三季中國ＧＤＰ增幅百分之九，比今年首季增幅達百分之十點六固然大為遜色，較去年同期的百分之十點○一亦有所不如；第三季增幅為三年來首次跌落單位數字。如此增幅，是所有成熟經濟體系不敢想像的高速增長，但中國有就業人口太多（鄉民大量湧進城市找工作）必須解決的困難，保持高增長是唯一壓低失業率的途徑。

Point 2: Investement increases and then employment rate decreases. This helps to absort the massive man power generated from the villages (annually 240k? people from village to city not including new graduates) and avoid high employment rate.

第三、以中國的現行制度，自私人性很難滿足，因此貪腐之風極可能變本加厲，此次出台的「十措施」（十招），包括取消對中小企及對商業（其實是國營）銀行的貸款限制，雖是對症下藥，但「取消限制」等於增加貸款部門的酌情權，因此，這些措施不僅會形成更巨額的足以禍及日後經濟發展的「應收未收賬」問題，而且必然會令貪污之風更猖狂！

Point 3: Ease access to credits meaning money loaning is relaxed and this gives more chances corruption happening in China.