China: mini economic stimulus, but with careful consumption calibration

The level of complexity achieved by the Chinese economy is reflected in the political double track regarding public consumption.  Announcements are coherent and have a precise direction: reduce incentives, control the money supply, and credit selection.  The objective is to guarantee the quality of the intervention while keeping it under control.  On the other side of the government, worried by a perhaps excessive reduction in the growth rate, a series of measures have been put into action since the second semester that analysts are calling a “mini stimulus.”  It’s a matter of a series of operations to sustain the economy, such as lowering taxes on small- and medium-sized enterprises, cutting export procedures, investing in railroads and new support for the entire infrastructure macrosector.  The operation is different from 2008 in both quantitative and qualitative ways.  At the explosion of the crisis, China could do nothing but tap its reserves.  Consequently, 4,000 million yuan were injected into the system to avoid collapses and instability.  The recession striking industrialized countries had penalized the Big Dragon, and the closure of factories and construction sites carried with them an unsustainable burden for the government.  That titanic bailout undoubtedly saved China and has contributed to slow global recovery.  In any case, it presented two defects the government is now trying to avoid.  The enormous monetary flux was not always intercepted by the desired businesses, and as a consequence, the funds did not always flow to the intended sectors.  A lot of money flowed toward undesirable destinations: real estate speculation has hastened bursting the bubble, redundant contraction projects have fueled corruption, and the substitution of investments for consumption in global demand has remained a dream.  China used that money to grow its traditions: more cement, glass, steel, and consumer goods for export.  The economy has regained its footing, but underlying problems have been aggravated.  Furthermore, public debt has increased.  The new administration does not want to repeat the same problems and is proceeding with caution.  To know more, it has launched two investigations.  The first consists of five expert groups that research the real necessities of the most important cities.  They will attempt to understand how genuine the local administrators’ requests actually are.  Will resources be used to build new shopping malls for local business owners or to improve residential areas and public transports?  Contemporaneously, an ambitious auditing operation is underway to certify local governments’ debt, which is not included in national figures, at least not in their entireties that are presumed to be much higher than officially disclosed.  Beijing is, therefore, trying to avoid past mistakes caused by the urgency of the crisis but also—and more importantly—by errors accumulated over time, which are difficult to eradicate.  For this reason, the Chinese government moves judiciously, almost silently.  It doesn’t want to spread the impression of lavish actions, but it is worried about an excessively harsh economic slow-down.  The mediation between the two represents the quality of the government’s intervention, a calibration of the government’s actions, in any case called into question by many interests that have accumulated in the disorder of preceding years.