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China to step up fiscal incentives to boost growth

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More stimulus, more currency devaluation. this is a race to the bottom that will end up really badly for savers and prudent investors around the world. The kiwis also cut rates again, next will be Oz. Uk not raising anytime soon, Fed unlikely to raise too. Europe an all round mess. Only winners are the rich.

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Not surprisingly, the most common question is ‘China going to have a financial crisis?' and that kind of thing is impossible to predict. There is certainly a scenario where you start to go down that path, but there are unique features in China such as there’s no over reliance on foreign funding, a close capital account, heavy state influence over lenders and borrowers, that contributes to a more stable situation than other emerging markets. It’s possible that you get something more similar to a Japan type of scenario where you are not necessarily having a spectacular banking crisis in a short amount of time, but you have something that manifests in much slower growth, a correction in asset prices, and deflation over time.

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China has run out of fiscal and monetary systems to support its economy, which will become apparent when the Fed raises interest rates this month. Poor deluded Chinese, you do realize that Chinese debt is growing at 3X the rate that the Chinese economy is growing, even at the official rate of that imaginary 7% (but you and I both know it's only growing at 2.2%, much less than the rate that the US itself is growing). Any dullard would realize that the creation of this much debt is unsustainable, regardless of the bank savings of Chinese people (which itself is destroying Xi's China dream of consumerism replacing the investment/export model). That's a big laugh at your expense, because I warned you about the consequences when I touted Bernanke as America's greatest Cool War warrior, whose mission was the destruction of the PRC.

Remember when I told you that QE (which was the Fed loosing {I said loosing, not losing} upwards of 80 billion dollars a month into the global financial system) would not create substantial inflation in the US? Do you remember? And do you remember where I told you all that credit would go? I called it by its proper name of "Hot Money," which entered mainland China through Hong Kong, because it was the only legal way we could flood the PRC with easy credit? And that easy credit bubbled up the prices of homes and property and factories in China to unsustainable levels of debt.

And now we, the American people, sit imperially waiting for Xi's state visit to decide whether the Fed pushes Humpty Dumpty down the wall in September. Now we, the American people, wait imperially to see what concessions Xi will promise us not to push China's economy crashing off the wall in October, 2015. As you know, the PLA is merely a shadow play of strength, because we can starve China of food and fuel in 21 days, causing food riots against the government; so don’t even go there as a tit for tat. As we all know, Xi is coming to our shores begging a crumb and a morsel from his master. My advice to Xi Jinping is: Be prepared to come begging on your knees with your forehead pressed to the floor of American hegemony. Maybe then we’ll listen. Otherwise, all Xi’s horses and all Xi’s men will never be able to put the “PRC Dumpty” together again.

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