Dear Sir,
I am not a premium subscriber, so I cannot read the whole text of China outlook. But from your newsletter's excerpted introduction, I must say the analysis is very and comprehensive. And here is three points of my view as a inside watcher, hope it can be a supplement to your analyst.
Consumption growth
Consumption growth is strong as the data shows. But it will not continues. People buy so much because they are hooked by all kinds of voucher from the government. The price is a lot cheaper than before. After a while, they will realize they have no demand for these goods and service. For example, the car is cheaper because the government cut the tax. People bought many cars in the first six months. But the government now set a higher oil price, which means the cost of driving is higher. Many car owners are taking bus or ride bike as before!
Stimulus projects
Stimulus projects are all infrastructure development. They are all go to state owned companies. Small and medium private companies may get some peanuts only. These projects push fast economic growth. But in long term, the ability to achieve economic growth are damaged. Actually the government are giving state owned companies huge subsidy which is financed by the tax on small and medium private companies. So it is not surprise the small and medium private companies are suffering, if they are still running business.
Government debts
The condition of public finance is not good as looks. The total government debts in China this year, as some economist estimated, will reach about 65% of GDP. Several local government bond issuing plans are gave up because of lack of cash flow supporting. It means the public finance reach a break even. Now the government is talking about raising the property tax. It is a good idea, but it may also damage the property market.
Regards,
Zhijie Lu
I am not a premium subscriber, so I cannot read the whole text of China outlook. But from your newsletter's excerpted introduction, I must say the analysis is very and comprehensive. And here is three points of my view as a inside watcher, hope it can be a supplement to your analyst.
Consumption growth
Consumption growth is strong as the data shows. But it will not continues. People buy so much because they are hooked by all kinds of voucher from the government. The price is a lot cheaper than before. After a while, they will realize they have no demand for these goods and service. For example, the car is cheaper because the government cut the tax. People bought many cars in the first six months. But the government now set a higher oil price, which means the cost of driving is higher. Many car owners are taking bus or ride bike as before!
Stimulus projects
Stimulus projects are all infrastructure development. They are all go to state owned companies. Small and medium private companies may get some peanuts only. These projects push fast economic growth. But in long term, the ability to achieve economic growth are damaged. Actually the government are giving state owned companies huge subsidy which is financed by the tax on small and medium private companies. So it is not surprise the small and medium private companies are suffering, if they are still running business.
Government debts
The condition of public finance is not good as looks. The total government debts in China this year, as some economist estimated, will reach about 65% of GDP. Several local government bond issuing plans are gave up because of lack of cash flow supporting. It means the public finance reach a break even. Now the government is talking about raising the property tax. It is a good idea, but it may also damage the property market.
Regards,
Zhijie Lu
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