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China Economy

GM, China giant stimulus package

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My initial thought
China announced a giant $586 billion economy stimulus package a few days ago. My first response was not warm to it: I always think the Chinese goverment should invest in “Education and healthcare”. Infrustructure? Did not China already get really good infrustructures in the coastal areas including Beijing? China’s economy problem is more serious than US (on the surface it’s not), because it solely relied on foreign trade (export) for economy growth in last 30 years.

I can appreciate the goverment intention here is solving the “excess migrant labor workers”, and lack of middle class problems in China. They should act from tax policy, business regulations, etc. But I guess the Chinese goverment is for the business, by the business and of the business, just like the US gov.

My second thought
Bill Ackman was on Charile Rose recently (either Tuesday night or Monday night), and he was arguing GM should file for bankrupcy. My gut feeling is even if this makes economy sense, politically this is a difficult thing for Dems or President-elect Obama: their union connections.

I think I also have a second thought on China giant stimulus package (infrustructure), my initial thought was purely economics based. It’s just impossible to do the necessary reform (tax, cultivate middle class) in near term. If I was in Mr. Wen’s shoes, I would come to similar conclusions: we got to make sure those migrant workers employed, otherwise it’s a giant social problem.

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