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China: Worry on the striking, 4-trillion stimulus plan

Global economy is stumbling, and neither can China stay out of the trouble. On 9, Nov, a striking stimulus plan, totally of 4 trillion yuan, was announced to public by the central government. Stock market was encouraged, so was the confidence of global market as it signals China’s pledge to pitch in the effort to solve the financial crisis.

However, the worry of public didn’t fade away, but only turned to new concerns: first, would the immense plan simply mean a big meal for corruption; second, would the over-heated constructions lead to more shoddy works, as that exposed by the subway tunnel tragedy happened last month in Hangzhou?

A massive infrastructure spending program has been pushed forward. The stimulus package is estimated to reach at 4 trillion yuan (about 570 billion U.S. dollars), which will be spent in the next two years to offset the gloomy global economic condition.

This is just the plan proposed by the central government. Shortly after it was revealed, local governments all over China followed closely to open their own plans that totally amount to 18 trillion yuan. A wave of heated construction is expected to flood across the country.

In the agenda of central government, the 4 trillion is going to be spent on 10 categories, among them welfare investment such as housing for low-income, health-care system and education, also infrastructure-building such as new railways, roads and airports. Specially, aid to post-earthquake reconstruction in Si-chuan is mentioned in the agenda. Equally notable is the subsidy for farmers and an explicit announcement to increase the price of state food purchase from farmers.

Of only the fourth-season budget of 2008, as much as 100 billion has been allocated to different national departments and agencies. Among them, the department for transport further proposed a 5-trillion spending in the next 5 years.

The scale of the construction is unprecedented. And from the day it was pushed forward, a race has kicked off.

Journalists have reported that delegates from nearly all provinces and every department have rushed to the office of National Development and Reform Commission (NDRC) to apply for funding, so that they can grab a piece of the huge cake.

11月18日下午,在国家发改委门口,记者看到两边停着江苏、山东、河北等不少外地牌照的车辆。附近的清洁工和保安也向记者证实,近来门口的外地车辆连日不断,传达室也常常拥挤着不少人。

On the afternoon of 118, Nov, at the office of NDRC, cars from Jiangsu, Shandong, Hebei and so on were parked along the road. The guards and cleaners proved that, non-local cars surged to the office ceaselessly in these days, and the information room is always crowded.

The NDRC, along with its provincial branches, is the central agency charged to make finance plan and allocate funding. It is now one of the hottest places.

“都是老相识了,不但省里发改委,各厅局也抽调了人来。”得到记者在报道中不提及姓名的承诺后,河南省发改委一位工作人员对记者说,这些人中还有河北、山东等省发改委及财政厅的人员。

We know each other (the people coming to the office for funding) for long time. There are here not only people from provincial NDRD, but also deputies from many departments and bureaus.” An official from Henan province told anonymously. Besides, people from department of finance and other provinces were found there.

The race is speeding up. But blogger worry the fund will be spent as quickly as they were obtained but far more irresponsibly.

Plain-clothed-prince said:

最新消息称中央11部委争抢1000亿资金,在国务院的“快准狠”的目标要求下,积极落实各项措施无可厚非,但千万别为了邀功,别为了短期的GDP目标而浪费社会资源与要素

The lately news says 11 central departments have raced to snatch the 100-billion funding. Since the State Council requires that the stimulus plan should be carried out quickly, precisely and forcefully, there is nothing wrong to implement the policy actively. But never, never waste immense social resources only to boast short-term GDP.


Wang-anping
praised the tax-cut:

“在全国所有地区、所有行业全面实施增值税转型改革,鼓励企业技术改造,减轻企业负担1200亿元。”尽此一句话,就尤其给人直接的安慰和希望。

The 120-billion cut of value-added tax to encourage the tech reform of enterprises bring people hope and comfort.

But given the tunnel collapse in Hangzhou, bloggers warned that a controlled spending is even more important.

First, reporter Yang-chuanmin 杨传敏 told how the transport construction is crazily speeding up:

杭州地铁湘湖站原本预计三年的工期,缩短为不到两年。因工期短,施工方为了赶工期,很多细节没做到位。在5层楼高的应力挤压下,支撑钢筋捆不住围绕基坑的连续墙,逐渐变形,终于在15日下午,其中的一堵被扭转成一个巨大的S 形。

The Hangzhou subway station is planned to be finished in three years, but was then shortened to 2 years. In order to catch up, the constructors failed to take care of many detailed works. Under the strong pressure as powerful as that of a 5-story building, the supporting rods can’t hold out any more and finally twisted into S shape on 15th.

One of the Hangzhou subway stations was completed 11 months earlier than planned. A security report in July indicates: “From January to June, 128 safety problems have been detected.”

Therefore, blogger zhangranbaodao said:

杭州地铁坍塌事件,在眼下股市充满离奇、充满幻觉的时刻,是对投资大跃进决策与行为的最有力的一声棒喝!很明显,“紧迫感”与“责任感”驱动下,对于建地铁的态度是“只争朝夕”。现在……事实上,本来是“皇上不急太监急”;现在,四面火起,那已经变成:上面紧张了,下面更是急如星火。

The collapse is the loudest yell against the Great Leap on investment! Obviously, impulsed by “sense of duty” and pressure, people are now just considering to finish the subway construction as soon as possible. In fact, it used to be that the subordinates were hasty than their bosses. Now, as the fire has been set, it becomes that both the superior officials and the sub-ordinates turned impatient.

Though the plan of central government is already more than striking, the local governments leap even further. Its investment amounts to 18 trillion.

Among them, Yunnan province, neighboring Burma, proposed a significant 3 trillion investment plan. It includes the China-Burma oil pipe and some railways. Guangdong, fell behind a little with 2.3 trillion.

The funding for investment, according to experts, will mainly come from bank loans. Also, a large part will have to come from private sector, because the governments can by no means to afford so large a spending.

But bloggers express theirworry.

A columnist in Yan-zhao Metropolitan Daily says in his essay <4万亿 10万亿 18万亿 投资为何变竞赛> 4 trillion, 10 trillion, 18 trillion, why the investment turn into a race:

笔者认为,18万亿投资计划存在泡沫的一个理由是,很多地方政府无米下锅。……还有学者预计地方政府直接债务规模在2万亿左右。背负这么多的债务,加之未来财政收入的不确定性,如何保证18万亿投资计划实施,是一个未知数。即便可以通过银行贷款等方式来筹措资金,但银行敢于按照地方政府的“胃口”放贷吗?地方政府又如何来还债呢?

I think, one of the reasons why the 18-trillion investment has much bubble is that many local governments have actually no affluent treasury. ……Scholars estimated that the direct government liability is up to 2 trillion. With so much debt, in addition to the uncertainty of future income, it is an X that how the 18 trillion can be guaranteed. Even though banks are able to lend, dare them fully meet the governments’ demand? And how can they pay the debt in the future?

Also, writer Niu-dao 牛刀 said in his article 18-trillion investment is great sweet-talk《地方政府18万亿投资是个超级大忽悠》

加印钞票风险显而易见,那就是通货膨胀会达到无法遏制的地步。

The risk to print more money is obvious, for that the inflation will be uncontrolled.

Additionally, Ye Tan pointed out in the article, Local governments need no 10-trillion investment, letting alone the 18 trillion 《地方政府投资无需10万亿更无需18万亿》that 4 problems will be troubling:

四分之一的项目未按期建成投产;将近四成的已建成项目运营效果差;部分工程质量存在重大隐患;挤占挪用建设资金及损失浪费问题严重。”

The former experience shows that 1/4 projects were not completed in time; nearly 40% projects don’t run well; some has significant problems on their quality; waste and embezzlement are of great damage.

While the most straightforward criticism comes from the scholar, professor Xu-zidong , who in a TV talk program relentlessly impugned that half the 4 trillion will be used for CORRUPTION. The program was scheduled to be rebroadcasted at 6:30 next morning. But audience found it replaced. Is it simply a pointless talk, or too honest to be tolerated?

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