<China Watch>Economy to shift from '2-Wheel' to '4-Wheel Drive' in 99.
Drew:
I hope you heard the news about Dell growth rate in China posted by Lockeon a while ago. Now put that in perspective with what the Chinese government is doing to bolster the economy.Looking pretty good to me. Judging from what I have read thus far China should be a hyper-growth area for Dell and the growth has already begun-Can you say GREEN? Now 'git'em' bags ready you hear me.<g>
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China Shifts Gears to a "Four-Wheel Drive" Economy in 1999
(3/5/1999) China will follow three new key policies this year to strengthen its ailing economy, according to the March 4 Zhongguo Zhengquan Bao (China Securities News):
To change focus from the quantity to the quality of public infrastructure projects;
To recognize the importance of developing a flourishing private sector in China; and
To encourage domestic consumption.
Last year China announced a three-year package for infrastructure spending totaling US$1.2 trillion. The first year of that spending largely accomplished the goal of boosting economic growth to near China's 8% target, but several recent well-publicized bridge collapses have caused concerned in China over the quality the projects.
China's private enterprises have been growing in importance in economic terms ever since China began its sweeping economic reforms in 1979. However, the private sector showed signs of fatigue last year as fixed assets investment remained flat.
Investment in the state-owned sector increased by 19.5% last year, according to the newspaper. But the private sector languished, and village and township enterprises and urban private enterprises received very little new investment last year.
These decreasing levels of private sector investment are not expected to change. However, China's parliament, the National People's Congress (NPC), in a highly symbolic move, will amend China's constitution this week to officially recognize the key importance of a healthy private sector China's overall economic health.
A Four-Wheel Drive Economy
Last year interest rates were lowered three times, but savings deposits kept growing. At the end of the year, deposit balances were RMB 5.34 trillion (US$645.80 billion), or an increase of 17.1%. New deposits in 1998 were RMB 712.77 billion (US$86.19 billion), or 143% of the RMB 497.56 billion (US$60.16 bn) GDP growth in China last year, the newspaper said.
The 17.1% increase in deposits last year was the largest increase in the past seven years, and outpaced growth in retail spending for consumer goods by two and half times.
In 1999, the government will try to switch from a "two-wheel drive" model for economic growth based on public spending, to a more powerful "four-wheel drive" model which adds the stimulative impact of domestic consumption. Believing that domestic consumption will ultimately drive the economy, China will stimulate that consumption by encouraging banks to make consumer loans.
Infrastructure spending, the policy used last year to increase domestic consumption, grew 14.1%, compared with the originally forecast 10% growth scheduled at the beginning of 1998, according to the newspaper.
The "two-wheel drive" policies of 1998 were intended to expand domestic consumption. But the increase in investment did not result in a similar increase in consumption. Retail sales remained healthy in 1998, and China's total retail sales of consumer goods was RMB 2.915.3 trillion (US$352.52 billion).
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