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Monday, August 25, 2008

Uh Oh: Even The Chinese Are Contemplating a Stimulus Package

Uh oh. No es bueno. (I don’t know how to say, “This is really really bad” in Chinese)

You don’t want to hear that China is considering a stimulus package… Not at all. That definitely means things are much worse than expected both in China and global scale.

This should be a giant warning sign that even the most stubborn Bulltard can’t ignore…

China considering 370 bln yuan economic stimulus package – report: “China is considering a 370 bln yuan package of fiscal expenditures and tax cuts to stimulate the economy, the Economic Observer reported, citing a source close to the matter.

The report said said the plan includes 220 bln yuan in government spending and 150 bln worth of tax cuts.

The plan received initial approval from the Central Leading Group on Economic and Financial Affairs, a body under the State Council, but further details will be finalized by the finance ministry and other government departments.

Last week, JP Morgan said in a note to clients that the Chinese government is considering a stimulus package of 200-400 bln yuan in tax cuts and capital and housing market stabilization measures.

As a result, the benchmark Shanghai Composite Index closed up 178.81 points or 7.63 pct at 2,523.28 on Wednesday.”


Anonymous said...


Chinese GDP has grown at >8.0% for the last 7 years and they need an economic stimulus package? And then the Shanghai index rallies? Sounds like they have the same cheerleading going on over there (maybe even worse!) that we have here.

Ben, what are the Canadian versions of CNBC and BloombergTV like? Do you watch them at all?

-Mike J

Ben Bittrolff said...

Mike J,

I can't even make this stuff up. I wouldn't have the imagination...

BNN (Business New Network)... formerly ROBTV (Report On Business). I was actually featured on ROBTV back in August of 2000 as the tech bubble imploded. A full 25 minute interview, back when I was a punk kid daytrading dot bombs...

Anonymous said...

You know Ben, I've come to a basic conclusion: Our entire planet is BANKRUPT. There's simply TOO MUCH debt and not even money. Too many people buying shit they can't afford, but believe they are entitled to.. Our day of reckoning will be a very painful one indeed...

Anonymous said...

They have already had a little one where the govt gave rebates for large appliance purchases.

8% growth is no fun for average person if inflation is over that.

Anonymous said...

There's a theory out there (can't remember who came up with it) - the problem with the world is not too much debt but rather too much savings.

Because of the Chinese one-child policy, China's Seniors have saved like crazy. (The thinking goes since you won't have enough children to take care of you - you need to save). All these savings need to find a home, hence the financial engineering to create new products to capture these savings.

Which of course means that with ample supply of debt - consumers, corporations and investors go on a buying binge.

Guess what happens when the binge ends? I doubt the saver is going to be immune from the after-effects.

Unknown said...

Actually by their own account the PRC needs ~10% annual growth just to absorb additions to the labor force. Right around that at the last quarterly report, but slipping lower over consecutive quarters.

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