The Chinese stocks are going down.
Nice.
In the mean time we mention something else: fiscal stimulus has peaked and now the effect becomes visible.
No more candies.
It seems that the government is recollecting the money before somebody used it. Except for short term profits.
Standard Chartered bank is writing:
We run into one of the classic problems with China’s macro-management style: the tyranny of targets. While most economists would be counseling tax cuts and other measures to lighten the load for business, the MoF is doing its level best to hit its 8.2% total revenue target for 2009, causing a fair amount of misery for the corporate sector. Compounding the problem, the targets tend to rise as they are transmitted down to local governments. According to the ‘Economic Observer’, many city and district governments are being asked to hit an 11% y/y revenue target this year, just so that their superiors can be sure to hit their target.
Nice.
In the mean time we mention something else: fiscal stimulus has peaked and now the effect becomes visible.
No more candies.
It seems that the government is recollecting the money before somebody used it. Except for short term profits.
Standard Chartered bank is writing:
We run into one of the classic problems with China’s macro-management style: the tyranny of targets. While most economists would be counseling tax cuts and other measures to lighten the load for business, the MoF is doing its level best to hit its 8.2% total revenue target for 2009, causing a fair amount of misery for the corporate sector. Compounding the problem, the targets tend to rise as they are transmitted down to local governments. According to the ‘Economic Observer’, many city and district governments are being asked to hit an 11% y/y revenue target this year, just so that their superiors can be sure to hit their target.
We are not sure to what extent companies are actually paying unpaid taxes — or are just contributing funds from their current revenues out of patriotic duty. There are certainly anecdotal reports of the latter. So while the government wants companies to invest in theory, the funds they need in order to do so are being taken. This is the way China’s stimulus ends. Not with a bang, but with a whimper.
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