The numbers are out and China's GDP grew 6.1% last quarter. Down from the 13% 2007 numbers, China is not in bad shape. Here are some important attributes:
* China's financial system is healthy and the banks are lending
* China has a fiscal surplus and is financing it's stimulus through that
China's biggest challenge is to increase domestic demand so the country is not as export reliant. This is a tall order. Yes, there were record car sales in March, but the Chinese do not have health plans or social services and continue to sock money away for a rainy day.
http://english.aljazeera.net//business/2009/04/20094163218569726.html
Showing posts with label stimulus. Show all posts
Showing posts with label stimulus. Show all posts
Friday, April 17, 2009
Monday, February 2, 2009
Tracking Japanese Stimulus
I'm still gathering numbers on various stimulus packages. According to 1/29/09 WSJ, Japan's series of stimulus measures amount to 75 trillion yen ($842.5 billion). And the Liberal Democratic Party just pushed through an extra fiscal year end (March 31) of 4.8 trillion yen - (nearly $54 billion).
Monday, November 17, 2008
Japan's stimulus clarity needed
Japan officially acknowledged that the country is in a recession; its first since 2001. The decline in gross domestic product from July-September was the second consecutive quarter of negative growth -- meeting the definition of recession.
With an export-reliant economy, the corporate earnings projections aren't very rosy. The dependence on outside demand puts a spot light on Japan's need to stimulate its domestic economy.
Japan learned a great deal of lessons from the 90s and corporations have made tremendous improvements to their balance sheets. The Daily Yomiuri reported that the impact of 2007 troublesome domestic issues were acknowledged. Jesper Koll, CEO of hedge fund Tantallon Research Japan said "the domestic economy began faltering in the summer of 2007 under higher taxes and a credit crunch in the consumer finance industry. Regulatory debacles, including a massive pension scandal and confusion over new construction regulations, added to the worsening conditions."
Japan's recession is projected to continue for a few more quarters, but not to the same level as the U.S. or Europe. If the government can inject more cash and clarity into their domestic stimulus, Japan should be able to pull ahead of their peers. But to increase domestic demand, the government needs to put cash in the hands of all its citizens and provide the leadership to empower them to spend.
Sources:
http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_MARKETS_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html
http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_ECONOMY_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html
Note: the yen closed Friday at 97.20 yen to the dollar.
With an export-reliant economy, the corporate earnings projections aren't very rosy. The dependence on outside demand puts a spot light on Japan's need to stimulate its domestic economy.
Japan learned a great deal of lessons from the 90s and corporations have made tremendous improvements to their balance sheets. The Daily Yomiuri reported that the impact of 2007 troublesome domestic issues were acknowledged. Jesper Koll, CEO of hedge fund Tantallon Research Japan said "the domestic economy began faltering in the summer of 2007 under higher taxes and a credit crunch in the consumer finance industry. Regulatory debacles, including a massive pension scandal and confusion over new construction regulations, added to the worsening conditions."
Japan's recession is projected to continue for a few more quarters, but not to the same level as the U.S. or Europe. If the government can inject more cash and clarity into their domestic stimulus, Japan should be able to pull ahead of their peers. But to increase domestic demand, the government needs to put cash in the hands of all its citizens and provide the leadership to empower them to spend.
Sources:
http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_MARKETS_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html
http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_ECONOMY_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html
Note: the yen closed Friday at 97.20 yen to the dollar.
Tuesday, November 11, 2008
Japan disappoints
It looks like Japan is playing games with how to distribute the cash benefits from their newly announced stimulus program. They had promised $20 billion to be spread among all the households in the country.
Yesterday's announcement that the government doesn't plan to set income cap limits for payout eligibility seems innocuous. But when Prime Minister Aso added that he preferred that high income earners voluntarily decline to file applications with municipal governments, I smelled trouble.
Without an income cap indicator, middle to high income earners are going to be put in a bind. Culturally, it would appear unseemly for them to show up at their municipal government office looking for a handout. This is unfortunate and will severly lessen the impact of the stimulus. This middle ground of earners are exactly the group who would spend the extra cash and impact domestic growth. The plan had meant to distribute 2 trillion yen into the economy by giving 12,000 yet to each adult and 8,000 yen to those under 18 or over 65.
And Japan could use the stimulus. Despite a large amount of cash reserves, imports have surged past exports. Imports are largely affected by oil as Japan is nearly 100% dependent on oil imports.
According to the NY Times (11/10), "exports to the United States dropped 10.9 percent and those to the European Union also fell 9 percent in September. Asia-bound shipments grew just 2.8 percent in the month. Exports alone account for about 18 percent of Japan's economy."
http://www.yomiuri.co.jp/dy/national/20081111TDY01303.htm
http://www.washingtonpost.com/wp-dyn/content/story/2008/10/30/ST2008103001994.html
Yesterday's announcement that the government doesn't plan to set income cap limits for payout eligibility seems innocuous. But when Prime Minister Aso added that he preferred that high income earners voluntarily decline to file applications with municipal governments, I smelled trouble.
Without an income cap indicator, middle to high income earners are going to be put in a bind. Culturally, it would appear unseemly for them to show up at their municipal government office looking for a handout. This is unfortunate and will severly lessen the impact of the stimulus. This middle ground of earners are exactly the group who would spend the extra cash and impact domestic growth. The plan had meant to distribute 2 trillion yen into the economy by giving 12,000 yet to each adult and 8,000 yen to those under 18 or over 65.
And Japan could use the stimulus. Despite a large amount of cash reserves, imports have surged past exports. Imports are largely affected by oil as Japan is nearly 100% dependent on oil imports.
According to the NY Times (11/10), "exports to the United States dropped 10.9 percent and those to the European Union also fell 9 percent in September. Asia-bound shipments grew just 2.8 percent in the month. Exports alone account for about 18 percent of Japan's economy."
http://www.yomiuri.co.jp/dy/national/20081111TDY01303.htm
http://www.washingtonpost.com/wp-dyn/content/story/2008/10/30/ST2008103001994.html
Monday, November 10, 2008
China steps up to the plate
China, the world's fourth largest economy, announced a 4 trillion yuan ($586 billion) stimulus plan. This is equivalent to about a fifth of China's 2007 $3.3 trillion gross domestic product.
The Chinese are sending a message to the world that they are doing their share and are important players in the world economy game. And they are doing a much better job at it than the U.S.
The money comes from "state banks and state-owned companies that are encouraged to expand more rapidly instead of from central and local governments (NY Times 11/10). With the bulk of the two year investment in infrastructure, they'll be ready to chug along their new rails, roadways and airports when the economy picks up.
Additionally, investment in low-cost housing, health care and agricultural subsidies are being planned. An important tax revision, called the value-added tax will allow companies operating in China to deduct spending on capital equipment (WSJ 11/10) Encouraging business investment will put China in a competitive position.
The U.S. package is shrouded in vagueness. Congress agreed to $700 billion to help strengthen banks, but does not direct the financial institutions to provide new lending or invest in U.S. projects.
The markets in Asia and Europe responded enthusiastically on Monday. The US market didn't fare as well. Maybe because the Chinese package was everything the US package isn't. It's clear and focused. It's investing in infrastructure. It's a lot of money backed by a time table and resources. And there's no question that China can pay for it as they sit on a pile of cash reserves.
Sources:
http://www.nytimes.com/2008/11/10/world/asia/10china.html
http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_CURRENT_ACCOUNT_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html
The Chinese are sending a message to the world that they are doing their share and are important players in the world economy game. And they are doing a much better job at it than the U.S.
The money comes from "state banks and state-owned companies that are encouraged to expand more rapidly instead of from central and local governments (NY Times 11/10). With the bulk of the two year investment in infrastructure, they'll be ready to chug along their new rails, roadways and airports when the economy picks up.
Additionally, investment in low-cost housing, health care and agricultural subsidies are being planned. An important tax revision, called the value-added tax will allow companies operating in China to deduct spending on capital equipment (WSJ 11/10) Encouraging business investment will put China in a competitive position.
The U.S. package is shrouded in vagueness. Congress agreed to $700 billion to help strengthen banks, but does not direct the financial institutions to provide new lending or invest in U.S. projects.
The markets in Asia and Europe responded enthusiastically on Monday. The US market didn't fare as well. Maybe because the Chinese package was everything the US package isn't. It's clear and focused. It's investing in infrastructure. It's a lot of money backed by a time table and resources. And there's no question that China can pay for it as they sit on a pile of cash reserves.
Sources:
http://www.nytimes.com/2008/11/10/world/asia/10china.html
http://hosted.ap.org/dynamic/stories/A/AS_JAPAN_CURRENT_ACCOUNT_ASOL-?SITE=YOMIURI&SECTION=HOSTED_ASIA&TEMPLATE=ap_national.html
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