GENERAL COMMENTS ON THE
CAPITAL MARKETS
ON CHINA: RONALD REAGAN
WOULD SMILE:
Speaking at the People’s
Congress in Beijing recently, Premier Wen Jiaboa
made it quite clear that China intends fully to achieve
8% growth in GDP this year. Not next year; not two
years hence, but this year…’09; the year of the Ox…
this year. Interestingly, Mr. Wen made it clear that not
only was the government intent upon force feeding
liquidity into the nation’s banks, but was also prepared
to make material cuts in income taxes, across the
board to sponsor such growth. Wen made it clear that
the only way he can see Chinese economic growth
returning to the not-so-long-ago-lost halcyon days of
9% growth almost relentlessly shall require more than
simple reserve injections.
Mr. Wen said that it is his intention to turn China from
an export driven society to a consumer driven one
instead. He know that liquidity alone will not suffice to
do what Beijing needs the economy to do; hence Mr.
Wen will begin this new era of growing consumer
demand by cutting corporate and personal income
taxes. According to
The China Daily, Mr. Wen said, in
the simplest of terms, that it is Beijing’s intention to
spur the economy forward by “
boosting domestic
demand through residential tax cuts, in addition to the
levy reduction for companies.”
The latter has already
been put into effect; the former is coming. Mr. Wen’s
proposed “residential” tax cuts include tax cuts on
securities transactions; tax cuts on property sales;
smaller taxes on exports and an end to a number of
“administrative charges” on various goods and
services. At a time when American law makers on the
Left are debating the possibilities of taxing stock
transactions, the Chinese are moving to end them!
Further, China is moving swiftly ahead with very real
“infrastructure” spending. The new term here in the
US is “shovel ready.” Our stimulus program is
manifestly un-shovel ready; in China, the shovels are
already at hand and the programs are being put into
effect, with workers being hired and ground being
broken. Mr. Wen has the calendar working for him too,
for this year marks the 60
th
anniversary of the founding
of the People’s Republic. As is always the case, China
will have myriad numbers of building programs in place
to commemorate that event. Too… and this is hard for
us to believe, for time passes so quickly… this is the
20
th anniversary of the Tiananmen Square Uprising.
