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China: RMB 4 Trillion Stimulus Package Questioned

In the past few months, some online public opinion leaders have openly criticized the Chinese government's RMB 4 trillion [approximately US 586 billion] stimulus package introduced in 2008 during the global financial crisis. But Chinese Premier Wen Jiabao defended the policy during the World Economic Forum's Annual Meeting of the New Champions in Tianjin on September 11, 2012 and stressed that the government “will not hesitate to use [the 1 trillion yuan budget surplus] for the fine-tuning of the economy” in the upcoming budget year.

Usually, when the Chinese government has made the decision on a certain policy, critical opinions would be censored. Beijing-based economist Han Zhiguo urged [zh] for more time for deliberation:


It is necessary to allow discussion of the RMB 4 trillion stimulus package. If discussion was allowed back in 2008 [blog posts were deleted heavily back then], the harm to the country's economy might not have been as devastating.

A poster against the hegemony property developer by Cou4 Visual Labs’ Facebook Page.

Han is very critical [zh] on the stimulus package:

【 四万亿救市祸国殃民 】 ①通过释放流动性来打鸡血,导致货币泛滥成灾和严重通胀,对居民财富形成隐性掠夺。②中国失去在危机中转型的天赐良机,落后产能得到保护,重复建设遗患无穷。③房价暴涨使得整整一代人买不起房,高房价扼住了中国经济喉咙。④地方融资平台恶性膨胀,债务危机紧扣中国大门。

[The RMB trillion stimulus package will harm the country and its people] 1. By stimulating the flow of currency to encourage bank load, but the result is over-flooding of currency in the market and serious inflation. This is like stealing money from ordinary people. 2. China has lost the chance of economic transformation in crisis, as the package has protected some old-fashioned industry and encouraged unnecessary construction. 3. The rocket-like increase in property costs has crippled a whole generation's ability to buy their own apartment. Property prices are a cut-throat kind of economic growth. 4. Through vicious expansion of local finance platforms, the debt crisis would hamper China's economy.

Blogger Wang Liangzhi explained [zh] the adverse effect of the stimulus package by focusing on the property bubbles:


The stimulation of internal demands has turned into stimulation of the property market. Saving the people has turned into saving the property market. The regulation of the property market has failed. As the briefly repressed market was taking revenge on the people, it bounced back like crazy. The objective of the package has failed and turned into a tragedy in the history of our country's economic development. We use our country's reserves to save the market, but some money flew into the property market and helped it to bounced back. The developers, with our reserves in their hands, pushed the land and property price sky high. The market is burning and the nation's economy has fallen into chaos.

Both Han and Wang's opinion echoed with other economic experts, such as Li Jing, a researcher on Chinese business, who explained the situation in China in more theoretic terms [zh]:


In China, the role of the government is too broad. Government and corporations cannot be separated and government officials have the tendency to show off their performance. The expansion of internal market demand has turned into overall GDP growth by expanding the finance sector, increasing the government's investment in grand construction projects which are unnesscessary. It has resulted in a bubble economy and local governments have forced the banks to give out the loan. It increases the risk and eventually results in serious inflation.
Whether Keynesianism [government intervention approach] is an effective economic theory is debatable. But we are sure that Keynesianism cannot work out in China.

If you find the above discussions a bit too academic, Tomorrow's Sky's blog post spells out [zh] the popular sentiment on the housing bubble more vividly:




Some said the property bubble is a ghost, everyone believes in it but no one sees it. What they mean is that our property market is very health and there is no bubble. It is just taking a bath, a sauna perhaps, they are so comfortable!…Because of high property prices, our GDP has become the world second largest. Because of high property prices, my family property is ten times more than our American counterpart's but their income is ten times higher than ours. Their housing property is less than 30% of their family's total property while ours is more than 70% of ours. Their property ownership rate is just 50-60% while ours is up to 90%. They dare to say we don't have a property bubble and that the bubble is a ghost? The ghost lies in their heart.

Who gain most interest in our society? The rich and the corrupt officials. Who owns most of the housing property here? Also the rich and the corrupt officials. Who migrates out of the country? Here again, the rich and the corrupt officials. Who said that we don't have property bubbles and opposed the property tax and pre-sell policy? Of course, it is the same group of people. Why? They are the vested interest group and they don't want to harm their own interests. They have become foreigners but have taken our resources and the fruits of our economic development. They don't care about China's future, but see it as a gold mine. They will not stop until the mine has been emptied.

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