Chinese Economics Thread

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fishrubber99

Junior Member
Registered Member
jli88 said:
People tend to confuse between personal finances, and monetary/fiscal policy of a nation.

For personal finances, a person can't print their own USD/RMB so stuff like "living within one's means", "saving", "low debt" etc make sense.

But a nation prints its own currency, so these concepts don't apply as long as inflation, exchange rates, and systemic stability are taken care of. The correct analogy would be if in my own family I use my own created fake currency to govern and incentivize my children. It doesn't matter how many of this fake currency I issue, as long as the incentivization or the "economy" is booming, children are working hard and productively etc.

China currently has an excess of savings, negative inflation, very low interest rates, and no external debt, specially no debt denominated in foreign currency. Ideally they should expand both the monetary and fiscal policy substantially.

They should be printing money and giving it to Universities for science, SOEs for tech development and upgrade, Startups/Companies as risk capital, and what not.

However, it almost appears that they are dealing with fiscal/monetary policy as if it is one's own personal finances.
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There's a few things I disagree with you in your post

- China does not have negative inflation/deflation necessarily right now, core CPI (CPI excluding food and energy prices) grew by 1.2% in October, meaning that for most non volatile parts of the economy, prices on the consumer side are marginally increasing.
- Total social financing has been growing by 8.5-9% this year, M2 money supply growing by 8-8.5% and M1 growing by roughly 7%, all of which outpace economic growth.
- China raised their total spending to 4% of GDP, which is a record high. Government spending is up 5.2% from last year, while government revenues are only up 0.2%, so spending is growing far more than taxation or other means the government uses to remove money from the economy. This isn't a government engaging in austerity whatsoever.
- Direct government spending in science and technology grew by 10% this year so they are putting more and more money behind technological development. They also did do specific stimulus measures like refinancing over a trillion dollars in local government debt, their trade-in and consumer subsidy program, allowing mortgage refinancing at lower interest rates, etc. Also introducing free childcare and a benefit for families with children less than 3 years old (which they will most likely increase in the future)

In the eyes of the Chinese government, this is them engaging in providing a large amount of stimulus and having a loose monetary policy, they just want to perform stimulus up to this year's economic growth target, and they don't necessarily want to push beyond 5% growth.
 
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