Home » Xi Jinping wants to build the Great Leap Forward to save the economy, there is only one trick left (Figure)

Xi Jinping wants to build the Great Leap Forward to save the economy, there is only one trick left (Figure)

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Xi Jinping wants to build the Great Leap Forward to save the economy, there is only one trick left (Figure)

Xi Jinping presided over the eleventh meeting of the Finance and Economics Committee, claiming to comprehensively strengthen infrastructure construction. (Image credit: Getty Images)

[See China, April 28, 2022](See a comprehensive report by Chinese reporter Li Zhengxin) Xi Jinping, director of the Central Financial and Economic Commission, presided over the 11th meeting of the Financial and Economic Commission on April 26, claiming to comprehensively strengthen infrastructure construction. It may mean returning to the old road of large-scale investment in infrastructure to stimulate the economy, and the Chinese central bank supports it with an ultra-loose monetary policy.

Infrastructure development is elevated to a higher level of importance

The 11th meeting of the Central Financial and Economic Commission of the Communist Party of China was held on April 26. Xi Jinping presided over the meeting to study the issue of comprehensively strengthening infrastructure construction. It was emphasized at the meeting that “it is necessary to be moderately advanced, and the layout of infrastructure is conducive to leading industrial development and maintaining national security.”

“Infrastructure construction has been mentioned as an important position related to economy and security,” Chinese state media said in a statement.

The meeting proposed that infrastructure construction should “mobilize the power of the whole society”, “speed up the construction of new infrastructure”, “must be moderately ahead”, “multi-wheel drive, and give play to the various roles of the government and the market, the central and local governments, state-owned capital and social capital”, “It is necessary to calculate both the economic account and the comprehensive account.”

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Financial analysts pointed out that this is not a great leap forward in infrastructure for the whole society, regardless of whether it is necessary or not?

Exports, investment and consumption are regarded by the economics circle as the “troika” of driving the economy. Among them, consumption is the weakest. In recent years, the Beijing authorities have repeatedly claimed that they want to expand domestic demand and stimulate consumption, and even put forward plans for an “internal circulation” of the economy. However, foreign trade, investment and consumption are already in decline. Under the influence of strict city closures and other epidemic prevention measures, this is an unbearable burden for the Chinese economy.

In 2021, final consumption expenditure and net exports of goods and services will contribute 65.4% and 20.9% to economic growth, respectively. In contrast, the data corresponding to gross capital formation is only 13.7%. Especially in the fourth quarter, the contribution rates of the former two to the economy reached 85.3% and 26.4% respectively, while the latter fell below zero to -11.6%.

“It’s not because of how fast consumption has grown, but because investment has shrunk too fast, which is not good for economic growth. Therefore, the role of investment in stabilizing growth must be brought into play.” Xu Xianchun, former deputy director of the Bureau of Statistics, told the Daily Economic News.

On April 27, the Investment Department of China’s National Development and Reform Commission (NDRC) issued a document on its official website, stating that actively expanding effective investment is not about blindly laying out stalls and projects, nor is it “flooding water” by implementing large-scale infrastructure investment plans. strong stimulus.

He Jiangbing, a Chinese financial scholar, pointed out to Radio Free Asia that the Beijing authorities are obviously forced to return to the old road of investing in infrastructure: “This is because the authorities have no other options. Consumption cannot be stimulated because ordinary people have no money. Especially this year, China’s economy has declined significantly, and everyone is afraid to consume. However, there are some problems in Shanghai Port, the world‘s largest container terminal, and the Pearl River Delta region, and there are problems in the production chain due to insufficient operation. Therefore, exports cannot be expected. Then It can only rely on infrastructure.”

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China’s central bank can only release water for monetary support

At last week’s G20 finance ministers and central bank governors meeting, China’s central bank governor Yi Gang said that China will flexibly use a variety of monetary policy tools to increase support for the real economy.

Liu Qiao, Dean of Peking University Guanghua School of Management, said at the 2022 Boao Forum for Asia Annual Conference, “Guanghua School of Management and Ant Financial jointly conducted an information survey on small and micro operators some time ago, basically starting from the third quarter of last year. So far it has been in a straight decline. And one of the biggest demands here is that there is no demand (consumption, running water).”

At present, only the Central Bank of China has adopted a loose monetary policy in the world, and its broad money and social financing have reached new highs, which shows that China’s economy is not good, and it wants to use loose monetary policy to stimulate and remedy the economy.

On April 25, the People’s Bank of China cut the RRR by 0.25 percentage points across the board, and will invest another 530 billion yuan (RMB, the same below) in long-term funds.

In addition, information released on the website of the People’s Bank of China shows that 600 billion yuan of balance profits have been turned over, which is equivalent to 600 billion yuan of base currency. It will hand over more than 1 trillion yuan to the central government this year.

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Wang Yiming, a member of China’s Monetary Policy Committee, said in an interview with the Chinese media “First Finance and Economics” that “returning to the government the balance of profits in recent years exceeded 1 trillion yuan, which is equivalent to investing 1.1 trillion yuan in base currency.”

Some analysts pointed out that the 1.1 trillion yuan is additional money printing, new base currency, with foreign exchange earnings as collateral; it will increase the growth rate of China’s broad money by 3 percentage points, creating 7.5 trillion yuan of new broad money.

China’s central bank is expected to support it with more monetary tools as infrastructure activities progress.

Responsible editor: Xin He Source: look at China

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