While China’s central government is reluctant to
start a stimulus programme comparable to the previous RMB4 trillion one,
and despite the fact that the previous massive stimulus is widely
regarded as a mistake, local governments are considering stimulus like
last time.
Since Premier Wen put growth back to the top
priority, while stopping short of massive stimulus, many little things
have happened, ranging from plans to bring future investment forward to
cutting interest rates twice. Now, local governments are proposing some
massive stimulus on their own.
International Finance News has
a summary of what kind of growth stabilising measures local governments
are considering. For instance, Ningbo and Nanjing have announced plans
to stimulate consumption and rebalance their economic structures.
Meanwhile, Guizhou will announce plans to develop ecotourism which may
include some RMB3 trillion of investment if implemented in full (we have
no idea why such plans require RMB3 trillion, we speculate that they
want to clone dinosaurs *). Last week, I mentioned that the Changsha
government has an investment plan that amounted to 147% of the city’s
GDP if implemented in full.
Of course, no one would believe that some of these
massive plans will have any chance to be implement in full (local
governments routinely overstate their plans when they announce them).
The RMB3 trillion investment programme by Guizhou, for instance, sounds
totally unrealistic, especially when you consider that the planned RMB4
trillion stimulus last time was supposed to be spent throughout the
country while this one is planned for a single province. Changsha’s plan
is also extremely large compared to the city’s economy.
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