I see what you mean. Not sure why Xinhua agency said so. IIRC the Chinese governments start their FY at Jan 1. Perhaps it is close to the end of FY2023 so the government is not expecting big changes to its income and spending? But accounting and economy are not my fields.
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Chinese Economics Thread
- Thread starter Norfolk
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For China's fiscal deficit, if it is targeted to be 3.8%, then the Chinese government would allocate such money to be spent. At year end, all government agencies or provinces need to spend the allocated money as such funding won't move to the next budget year. It is more of used it or lost it.
Of course, the government might not be able to accurately predict total income so in order to maintain the budget deficit within certain percentage, government agencies and provincial government would be conservative in spending until year end. That's why Chinese government always has the year end spending rush.
Of course, the government might not be able to accurately predict total income so in order to maintain the budget deficit within certain percentage, government agencies and provincial government would be conservative in spending until year end. That's why Chinese government always has the year end spending rush.
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That it not what is happening when the government takes out bonds. "Printing money" in the contemporary context involves typing a larger number into the value of the big four banks' reserve accounts with the PBOC. This then enables them to easily make new loans backed by this increase in reserves.The big guy now understands printing more money is the way to solve the economic problem..
What happens when the government takes out bonds is that it is selling bonds to the big four banks among others, which involves these banks basically extending loans to the government whose interest rate and maturation period is equal to that of the bonds and whose principle is equal to the total value of the bonds that the bank is buying.
This may sound pedantic but these have dramatically different macroeconmic implications and it is important not to mix them up.
Now governments can and sometimes do print money to lower the interest rate and then take out bonds on the cheap, as the US did during the pandemic and great recession, but they are still very distinct operations with distinct effects and are not normally coupled like this for various political reasons.
Lol, was about to post this with the caption
"The power of sanctions"
Actually this doesn't take into account that a lot of government spending goes straight back into government income. 13% is returned immediately when spending domestically as VAT. A certain percentage will return over the next months in income tax and corporation tax. Any salaries that are paid out are partially spent on private consumption and more VAT will be due. Any profits made by SOEs owned by the central government is more potential government income. Even when money is spent on imports, there is some tariff incomeI am not following. The article does not mention the interest rate at all.
This is the sentence copied from the article (emphasis theirs). It says "The national fiscal deficit will increase from 3880 billions yuan to 4880 billions. Accordingly the deficit to GDB ratio will increase from 3% to 3.8%."
So when the government spends 1 trillion yuan, the national deficit should go up by quite a bit less than 1 trillion, depending on what it's spent on
Can yuan go back to 6 vs US dollar in 2024?
I'd say unlikely. In addition to the gap between the interest rates, yuan is weak because speculators are not as bullish on China's economy growth. There are also signs that the US has been cooking its books to boost the stats to keep the stock markets afloat for election. But I am not in economics. Others more familiar with the topic might have different opinions.Can yuan go back to 6 vs US dollar in 2024?
But some have suggested that Yuan has declined not because yuan itself has weakened but the dollar has strengthened due to fed interest hikes.I'd say unlikely. In addition to the gap between the interest rates, yuan is weak because speculators are not as bullish on China's economy growth. There are also signs that the US has been cooking its books to boost the stats to keep the stock markets afloat for election. But I am not in economics. Others more familiar with the topic might have different opinions.
I think this is true but it's not conflicting with what I said in my previous post. Exchange rate is about the relative strength of the two currencies.But some have suggested that Yuan has declined not because yuan itself has weakened but the dollar has strengthened due to fed interest hikes.