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China's $586b stimulus package

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Well they need it and they will be playing catch up for a while to come IMO
But the most important point is They are doing it because they Can!!! a great position to be in.

Battered and bruised Hedge funds manipulating commodity markets :(

Wait till reality takes hold, then we may have a more realistic take on demand :2twocents
 
nick2fish said:
Well they need it and they will be playing catch up for a while to come IMO
But the most important point is They are doing it because they Can!!! a great position to be in.

Battered and bruised Hedge funds manipulating commodity markets :(

Wait till reality takes hold, then we may have a more realistic take on demand :2twocents
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Cheap resources provide a good oppotunity for CHina to further industralize and generalize.

How much miners are to benifit? Not much. China was blamed for high oil/other resources price until August this year, while its demands so far hasn't dropped much, the curde oil price for exampla has gone down to 63 as today from 140. Now everyone hopes it's driving the price/whole market up? Give it a break. China has a big need of resources, but the world is much bigger. China is lucky to have a good run itself.
 
About time they did something, they do have 1.4 trillion USD in reserves that they want to re-deploy out of US treasuries into more agressive & diversified assets, this looks like a smart play by the chinese.
 
weirluo said:
Cheap resources provide a good oppotunity for CHina to further industralize and generalize.
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Yeah that's a good point. I have a feeling that this stimulus package will mark establishment of China as the worlds largest superpower.
 
A $586 billion stimulus package or just rearranging chairs on the titanic?


China’s Stimulus Plan Is No Such Thing
Paraphrasing Nixon, have the Chinese become Keynesians now, too?

I don’t believe so.

China’s proposed $586 billion dollar stimulus plan sure generated a lot of excitement this past weekend. It was amusing to watch the SPX futures tick up on this supposed new program. Especially when we compare it with the $170 billion in tax rebates this summer ”” The Economic Stimulus Act of 2008 ”” which was only 1% of GDP of the US, versus about 18% of China’s GDP.

But is China’s plan really a new stimulus? The short answer is no, and it took the market about half a day to figure this out yesterday.

Why? Compare China ”” a country with a centrally planned economy, carefully managed by a communist regime ”” with the United States. The US has a $14 trillion economy, of which about $3 trillion is government spending (military, entitlements, discretionary). Any new stimulus plan ”” be it tax rebates, direct spending on public works programs, or aid to the auto industry ”” is essentially new spending that didn’t previously exist.

When $3 trillion becomes $3.17 trillion, it is significant. It is as if the US is adding more pieces to the economic chess board.

China, on the other hand, is merely moving resources from one region to another. They are not creating more economic activity, putting cash in thew hands of consumers, or even increasing their infrastructure plans.

“Bullishness in Asia on Monday was tempered by questions about how much of China’s plan is actually new ”” or is simply a repackaging of past commitments, such as the rebuilding effort following the Sichuan earthquake. Investors appeared to question estimates that Beijing would spend another 6% to 7% of its gross domestic product in each year of the plan, as the raw numbers of the plan would suggest. . .

Beijing may be prepared to add extra stimulus. A Beijing think tank, the China Academy of Social Sciences, said Monday it has submitted a report to economic policy makers outlining ways for the government to offset stock-market panic. One suggestion is to deploy as much as $115 billion to buy shares in the stock market’s 50 biggest companies if the Shanghai Composite Index slips to 1500. The market remains 64% below last year’s close.

The package didn’t address one big question about China’s economic-policy plans: whether it will stoke its own domestic demand by letting the yuan rise, or act defensively to let the currency fall to relieve pressure on its own exporters.”​
On their economic chess board, all they are doing is moving pieces about. But they are not actually adding anything to the board.

This Chinese economic stimulus plan is a contradiction in terms.
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think it's in the right direction.
all government should move the infrastructure needs for the next 10 years forward to the next 2 years. at least then they can keep the the unemployment figures from rising.

hopefully this becomes mainstream at the g20 meeting

what's buggering me is, our politicians are talking about cutting infrastructure spending in a economic crisis.

let's have a negative budget now! we can make up for it in a year time.
 
The stimulus package may be insufficient to reverse the global slide. Oil has fallen below $60 and other commodities are suffering the same fate.
 
China needs to do this as anything under 9% growth for china is a recession.
We are Starting to see this now, there has been about 3000 factory closures so far in the pearl river delta, mainly in cheap goods (clothing, toys, shoes, etc). This is also a good thing as it gets rid of the fly by night operators, and make the other factories get there duck in a row.

unemployment will be a problem in some of these delta cities. Dongyuan is an example, was there last week and in some places it is a ghost town, where last year it was hard to get a factory unit, now it's take our pick.

on the other side they need to keep up with the infrastructure projects, power and water are the big ones, a lot of places have manatory days of no power for factories and even then it goes out for no apparent reason on the other days.
Then there are the new roads, airports, rail lines, ports, that need to be built and maintained just to get all the people across the country connected.
They have come a long way but still have a long way to go.

China it just keeps changing by the day.
 
I am subscribed to the Euro Pacific Newsletter. please remove this post if it is spamming but I thought it was kinda relevant.

China's Stimulus Spells Trouble for U.S.

This week, Asian markets were initially energized by China's announcement of a near $600 billion economic stimulus package for its own economy. Although I have never been a fan of government-fueled stimuli, the relative wisdom of the plan hinges on the source of funds the Chinese government decides to utilize. Their best choice would be the country's nearly $2 trillion in foreign reserves, the largest portion of which is held in U.S. Treasury and agency debt. This pile of dollars, which really amounts to no more than a subsidy for U.S. consumers, does nothing to benefit Chinese citizens.

If it does decide to employ this ocean of cash, China will become a net seller of U.S Treasuries just as the U.S. Government itself will be pushing up its issuance of new Treasury bonds into record territory. With two huge sellers and few major buyers (just about every major creditor nation having problems of their own), the Federal Reserve will become the only reliable customer. As a result, not only will the Fed monetize our own economic stimulus packages, but will be forced to provide the same service to the Chinese.

Most economists feel that China will maintain the status quo by borrowing or printing the funds for their own stimulus while continuing to hoard its trillions of existing U.S. dollars. Most also believe that the Chinese will substantially increase their dollar holdings in order to finance America's never-ending string of bailouts and its ballooning Federal deficit, which is soon to pass $1 trillion annually. These optimists are in for a rude awakening.

The Chinese cannot follow such a course without unleashing intolerable inflation at home. Selling down their vast reserves of U.S. debt and using the proceeds for domestic infrastructure projects (or anything else for that matter) is a vastly superior stimulus mechanism than "lending" to Americans so we keep "buying" their products. When Chinese authorities finally figure this out the United States will suffer the consequences.

As they have in the past my critics will cavalierly dismiss this view. However, as the following compilation of some of my 2006 and 2007 television appearances attests, my economic predictions have proved extremely prescient:

Click here to watch it on YouTube.

However, given recent global stock market and currency volatility, some are questioning the wisdom of my investment strategy. I am confident that the short-term effects suffered by foreign stocks and currencies as a result of financial de-leveraging and losses on bad U.S. debt will prove temporary. If so, my market forecasts will ultimately prove just as accurate as my economic predictions. Those who are currently patting themselves on the back for having had the apparent foresight to stay in U.S. dollars will be singing a different tune when the music stops playing.

Sincerely,

Peter Schiff
President and Chief Global Strategist
Euro Pacific Capital
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Flip said:
I am subscribed to the Euro Pacific Newsletter. please remove this post if it is spamming but I thought it was kinda relevant.
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LMAO! Peter Schiff vs the other dude, who must be eating some serious humble pie right now. I recommend everyone watch this youtube link!

They are laughing at him like hes crazy.
 
WOW that video was insane (and fantastic) i cant believe every so called expert was against Peter and they were taking the piss out of him (laughing etc...) hehe Peter is the man and to think he's Ron Pauls advisor the 2 cant get any better.

Highly recommended.
 
Haha. Peter Schiff is the man, thats for sure.

Can someone answer this question for me though please. China has been building up these foreign reserves over the past decade through such large trade surpluses...then how does the Chinese government get their hands on it? Shouldn't the reserves be owned by the private sector? Or is the difference between public and private sector in China less clearly defined than the developed Western economies?
 
Ageo said:
WOW that video was insane (and fantastic) i cant believe every so called expert was against Peter and they were taking the piss out of him (laughing etc...) hehe Peter is the man and to think he's Ron Pauls advisor the 2 cant get any better.

Highly recommended.
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Indeed, this is a truly amazing video, i can believe how arrogant some people are...
 
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