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China: RMB 4 Trillion Stimulus Package Questioned

In the past few months, some online public opinion leaders have openly criticized the Chinese government's RMB 4 trillion [approximately US 586 billion] stimulus package introduced in 2008 during the global financial crisis. But Chinese Premier Wen Jiabao defended the policy during the World Economic Forum's Annual Meeting of the New Champions in Tianjin on September 11, 2012 and stressed that the government “will not hesitate to use [the 1 trillion yuan budget surplus] for the fine-tuning of the economy” in the upcoming budget year.

Usually, when the Chinese government has made the decision on a certain policy, critical opinions would be censored. Beijing-based economist Han Zhiguo urged [zh] for more time for deliberation:

四万亿救巿问题必须允许讨论,如果当年允许讨论而不是狂删博客,就不致于对整个经济造成如此重大伤害。

It is necessary to allow discussion of the RMB 4 trillion stimulus package. If discussion was allowed back in 2008 [blog posts were deleted heavily back then], the harm to the country's economy might not have been as devastating.

A poster against the hegemony property developer by Cou4 Visual Labs’ Facebook Page.

Han is very critical [zh] on the stimulus package:

【 四万亿救市祸国殃民 】 ①通过释放流动性来打鸡血,导致货币泛滥成灾和严重通胀,对居民财富形成隐性掠夺。②中国失去在危机中转型的天赐良机,落后产能得到保护,重复建设遗患无穷。③房价暴涨使得整整一代人买不起房,高房价扼住了中国经济喉咙。④地方融资平台恶性膨胀,债务危机紧扣中国大门。

[The RMB trillion stimulus package will harm the country and its people] 1. By stimulating the flow of currency to encourage bank load, but the result is over-flooding of currency in the market and serious inflation. This is like stealing money from ordinary people. 2. China has lost the chance of economic transformation in crisis, as the package has protected some old-fashioned industry and encouraged unnecessary construction. 3. The rocket-like increase in property costs has crippled a whole generation's ability to buy their own apartment. Property prices are a cut-throat kind of economic growth. 4. Through vicious expansion of local finance platforms, the debt crisis would hamper China's economy.

Blogger Wang Liangzhi explained [zh] the adverse effect of the stimulus package by focusing on the property bubbles:

拉动内需变成了拉动房地产,救民生变成了救楼市,使得房地产市场调控变成空调,刚刚回归理性的房价又报复性反弹一路狂飙。救市初衷和目标均以落空告终。酿成了我国经济发展史上一大悲剧。四万亿救市动用的是国库资金,最后却有相当一部分资金莫名其妙的流入楼市,流进开发商的腰包。地方政府也疯狂出台了一批以救楼市为主要目标的救市新政,助推楼市起死回生、报复性反弹,房地产市场又继续疯狂发飙。开发商由于手里有了国库资金,催生了一个个天价地王,催生了一个个天价楼盘,房地产市场狼烟四起,国民经济又陷入一片混乱之中。

The stimulation of internal demands has turned into stimulation of the property market. Saving the people has turned into saving the property market. The regulation of the property market has failed. As the briefly repressed market was taking revenge on the people, it bounced back like crazy. The objective of the package has failed and turned into a tragedy in the history of our country's economic development. We use our country's reserves to save the market, but some money flew into the property market and helped it to bounced back. The developers, with our reserves in their hands, pushed the land and property price sky high. The market is burning and the nation's economy has fallen into chaos.

Both Han and Wang's opinion echoed with other economic experts, such as Li Jing, a researcher on Chinese business, who explained the situation in China in more theoretic terms [zh]:

然而,在中国,政府职能过于宽泛,政企不分,官员们还是以追求虚的政绩为目标。政府把扩大内需搞成简单的总量扩张,不加控制地实行货币和财政双扩张的政策,盲目投资、重复建设通过大量投入来求得GDP的增长。继而产生泡沫经济,地方政府逼迫银行贷款,进一步加大金融风险,最终引发通货膨胀。
凯恩斯主义的基本理论是否可靠,是一个广为争议的话题。然而我们几乎可以肯定,凯恩斯主义不能发展中国。

In China, the role of the government is too broad. Government and corporations cannot be separated and government officials have the tendency to show off their performance. The expansion of internal market demand has turned into overall GDP growth by expanding the finance sector, increasing the government's investment in grand construction projects which are unnesscessary. It has resulted in a bubble economy and local governments have forced the banks to give out the loan. It increases the risk and eventually results in serious inflation.
Whether Keynesianism [government intervention approach] is an effective economic theory is debatable. But we are sure that Keynesianism cannot work out in China.

If you find the above discussions a bit too academic, Tomorrow's Sky's blog post spells out [zh] the popular sentiment on the housing bubble more vividly:

有人说楼市泡沫是个鬼,大家都说有,谁也没见过。弦外之音是我们的房地产健康着呢,根本没什么泡沫,有的只是泡澡。一个个先泡芬兰,再洗桑拿,舒服着呢!…

因为高房价,我们的GDP跃升为全球第二,由于高房价,我们的个人家庭资产超过了收入是我们十倍的美国。人家房产占全部家庭财产的不到30%,我们的房产在家庭财产中的比重居然超过了70%;人家城市居民住房拥有率才区区的百分之五、六十,我们城市居民的住房拥有率接近90%。还说我们的楼市没有泡沫,还说楼市泡沫是个鬼,我看楼市泡沫不是鬼,有些人的心中倒是有鬼。

我们这个社会得利最多的是谁?是富人与某些贪官;我们这个社会住房最多的是谁?也是富人和贪官;我们这个社会移民最多的是哪些人?还是富人和贪官;说我们楼市没有泡沫,反对开征房产税,反对取消商品房预售制的又是哪些人?不用说,还是这些人。为什么?他们是既得利益者,谁都不愿意拿自己开刀。他们做着外国人,却霸占着中国的资源,独享着中国发展的成果,不但对中国的未来漠不关心,还把中国当成一个金矿,不淘空绝不放手。

Some said the property bubble is a ghost, everyone believes in it but no one sees it. What they mean is that our property market is very health and there is no bubble. It is just taking a bath, a sauna perhaps, they are so comfortable!…Because of high property prices, our GDP has become the world second largest. Because of high property prices, my family property is ten times more than our American counterpart's but their income is ten times higher than ours. Their housing property is less than 30% of their family's total property while ours is more than 70% of ours. Their property ownership rate is just 50-60% while ours is up to 90%. They dare to say we don't have a property bubble and that the bubble is a ghost? The ghost lies in their heart.

Who gain most interest in our society? The rich and the corrupt officials. Who owns most of the housing property here? Also the rich and the corrupt officials. Who migrates out of the country? Here again, the rich and the corrupt officials. Who said that we don't have property bubbles and opposed the property tax and pre-sell policy? Of course, it is the same group of people. Why? They are the vested interest group and they don't want to harm their own interests. They have become foreigners but have taken our resources and the fruits of our economic development. They don't care about China's future, but see it as a gold mine. They will not stop until the mine has been emptied.

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