What they are trying to do is to increase the cash flow to these real estate developers to prevent to many of them going bankrupt at once as that can potentially cause a financial crisis. They will give them enough not to go bust and the three red lines will prevent them from the excess borrowing of the past. This is a attempt to prevent a financial crisis now while hoping to stop future excess from the real estate sector.
Chinese Economics Thread
- Thread starter Norfolk
- Start date
The real estate industry definitely needs to be regulated strictly like banking.
Consumer spending remains weak; can anyone explain why the CPC doesn't seem to care about that?
how did Chinese gov't get so all powerful that they can just lift spending
They can directly give consumers money, just like every other government. Whether that's a good idea is a different story, of course.
But I don't think it's a stupid question to ask why the Chinese government favors supply-side policies over demand-side ones.
Giving money to Chinese consumers, they will just put it in their bank account. Do you think Chinese govt not understand this better than your typical western economists?
Right now, Chinese govt is giving purchase subsidies for cars to encourage spending. Of course, that will get attacked as unfair subsidies by the west.
And I don't disagree, but I think this is a much better answer than asking if they are "all-powerful."
The structural reasons for why the Chinese government favors supply-side measures are tied to industrial policy, SOEs, unemployment system, and so on which are not common in other countries which favor demand-side policies. But that is not obvious unless you are familiar with the system, which not everyone is.
The Chinese govt can give out more e-CNY red packets (which have strict rules on spending) on a much larger scale then the previous local/targeted campaigns, this can stimulate the economy and promote the adoption of digital RMB.
FriedRiceNSpice
Captain
Tax reforms would also give the government much more tools to work with in regards to influencing consumer spending behaviors.
Probably because the categories that drag down the Chinese Retail growth are not the growth that would benefit Chinese society overall. Like Cars(pollution), Clothes and Cosmetics.