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In Beijing, a Slice Of Opportunity
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Back outside in the cold, project manager Xu Yongjiu had traveled from his home in Inner Mongolia to Beijing to pitch a wind power project for his private business, Mianlian Wind Power.
He emerged from the main gate with a spring in his step, his head high, extra copies of his proposal tucked under the arm of his worn beige jacket. "They said they'll consider it," Xu reported as his three colleagues searched for their black sedan in the sea of black sedans parked haphazardly in front of the gate. "Of course, how much money we'll actually get, I have no idea."
For the moment, Shen Minggao and other analysts say the stimulus should be "sufficient" to jump-start China's economy and keep its gross domestic product growing at above 8 percent for at least the next two years. That is the minimum level that economists say is needed to keep generating enough new jobs to maintain stability in the labor market. GDP growth slowed to 9 percent in the third quarter, the first time in more than five years that China has recorded single-digit growth.
Although the stimulus plan addresses China's short-term economic needs, it does not directly answer the question of how to increase China's consumption and domestic demand. Analysts say that issue is critical to the U.S.-China trade imbalance and to the longer-term outlook for the world economy.
"These large infrastructure investments, aside from the fact that there'll be a huge amount of fraud and waste, aren't likely to be the most efficient way of transforming the Chinese economy," said Michael Pettis, a finance professor at Peking University. "Most people would argue that the most efficient way of boosting demand is by boosting household consumption."
Pettis said consumption accounts for about 30 percent of China's growth, compared with 70 percent in the United States. "They're both out of whack. A better balance might be 50 to 60 percent," Pettis said. "But 30 percent is definitely too low."
Researcher Liu Liu contributed to this report.
