A bullish article for China from Goldman Sach's Jim O'neill. If I may add, unlike the U.S. government who gave money directly to the citizens who did not spend it, China used a rebate voucher system whereby citizens can only get rebate from China if they bought goods (refrigerators, cars, etcetera) in their home province! The result: massive declines in goods inventory resulting in one of the best months for car sales in China. So far, the Chinese government has been showing they are a tad brighter than our government. When North Korea tested the rocket, U.S. reacted like a paranoid superpower losing its status, whereas China advised restraint. Come on, North Korea cannot even feed its people. There is no reason to get into another war over this.
http://www.ft.com/cms/s/0/251a8fee-2f47 -11de-b52f-...
According to Goldman Sachs strategist Jim O'neill, three policy initiatives stand out, and the results are starting to bear fruit. First, in November the authorities announced massive fiscal expansion, centred on fresh infrastructure spending. While my industry has quibbled about its true size ever since, this misses the point. The statement of intent was clear; interestingly the stock market noticed and has rallied since.
Second, and ultimately perhaps the most important development in the world economy, the government announced plans to develop a full medical insurance policy for the still vast rural community, the beginnings of which they plan to have fully implemented for 90 per cent of the rural community by 2011. This could result in an end to the excessively high Chinese savings rate, and allow much stronger consumption.
Third, and critical to our forecast upgrade, the authorities, led by the People’s Bank of China, embarked on a timely reversal of tightening financial conditions of the previous two years. According to our Chinese financial conditions index, conditions have eased a huge 520 basis points since last October.
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