Consumer Deal important than a new round of stimulus plan

National Bureau of Statistics, published yesterday in the first quarter of this year macro-economic operation indicators, a series of economic data faithfully reflect the achievements govermrnt increased investment, China's economy reflect how the Government out of a motivation to be how to develop the criteria, we predict the future, whether the Chinese economy's risks where.

Overall, the rapid decline in China's exports, a sharp decline in economic momentum has been reversed, the economy is stabilizing trend, but still in the tightening cycle, too early to talk about a full recovery. In the first quarter rose only 6.1% of GDP, the highest quarter of 1992, the lowest since statistics, CPI and PPI data also followed a downward path.

Worthy of attention is the economy driven mainly by government investment, private investment has not followed up; and historical data than the investment efficiency in pulling down.

In the first quarter increased 28.8% year on year investment in fixed assets, sub-regional perspective, growth of 3.7% in eastern and central regions increased by 5.2%, 11.8% growth in the western region. This reflects the flow of investment funds, because the central and western investment growth significantly faster than the eastern the eastern region increased by 19.8% of urban investment, up 34.3% in central and western regions increased 46.1%.

A quarter of GDP, primary industry added value 470 billion yuan, up 3.5%; the secondary industry 3.1968 trillion yuan, up 5.3%; the tertiary industry 2.9077 trillion yuan, an increase of 7.4%, again reflecting the capital flows, investment in the tertiary industry grew faster than the secondary industry, but the first significant increase in the investment industry 85.0%, growth is not rapid, reflecting the low efficiency of the rural economy.

China's industrial added value increased 8.3%, social consumer goods up 15.0%, revenue growth was negative 8.3%, indicating the overall corporate profitability is declining. Government-led infrastructure investment results have been marginal decline in GDP ten years ago, a 13% incremental investment can be, but today has reached 43%, now a unit of GDP to 5-7 units of incremental investment to promote, explain the same GDP need to put more and more money, which is not good news for the economic recovery. Because the economic recovery is fundamental to improve productivity, promote economic growth by increasing investment, only effective in time, can not be effective in the long term.

Changes in China's economic growth mode, the whole society is waiting for the government's economic policy next critical moment, repeat the main points of China's economic recovery, not redundant.

First of all, do not but GDP first. Although GDP growth can guarantee employment, maintaining stability, but any time the quality of growth are more important than growth in the number. As long as the quality of economic growth, GDP fell slightly on the not particularly terrible thing, per capita income growth and business efficiency is top priority.

According to the National Bureau of Statistics survey in Jiangsu Corps July 23, 2007 released data show that the Yangtze River Delta 16 in the first half of 2007 disposable income of urban residents was 10,566 yuan, 12,362 yuan per capita Shaoxing ranked first, above the Suzhou (10,927 yuan) nearly 1,500 yuan, which is the second consecutive year the city became the highest per capita income in Yangtze River Delta cities. Although the GDP growth rate is much higher than in Suzhou, Shaoxing, but in a number of indicators to measure the level of the wealthy residents lag behind even the interior of Chengdu, a city that can not pull the consumer, energy also relatively weak. The reason why east coast to combat deeply fall in exports has not been knocked down, it is because of the family property in the possession of wealth among the people support.

Second, because the CPI and PPI do not drop, but prices increased slightly resources, oil and other resources to enhance the price, stealth tax levied to businesses. Up oil prices is nothing more than the oil giant's losses passed on to consumers, in addition to statements look better than the oil companies pay the consumption decline, business investment will reduce such costs, the government on behalf of monopoly and competition for profits, will be China economic recovery can not shirk.

Third, credit expansion will lead to waste of capital, CPI and PPI drop in interest rates to free up space, if the Government really wants to stimulate the economy, reduce burdens, and their endless capacity to carry out day credit expansion, not as real to interest rates, reducing the costs of businesses and consumers.

Stability of the current economic slightly, mainly close to the 30% loan growth, massive government investment in the revitalization plan introduced ten industry, but the uncertainty of economic recovery, "input" and "outputs" from one another. In this case, to continue to expand their investment is limited.

April 15, Chinese Premier Wen Jiabao chaired a State Council executive meeting to analyze the economic situation in the first quarter, study and plan the next phase of economic work. Meeting a total of eight measures, the main focus is to improve people's livelihood, such as increased consumption, increased SME loans. New round of its expansion plans, might as well implement these measures, so that help people and wealth with the people, to encourage consumption.

The data in the first quarter where the real cause for optimism is that people's livelihood and increase investment in rural areas; worrying that the Government has led the market in the enhanced efficiency of investment declined. In view of the people's livelihood will not soon stimulate investment in GDP growth, but to let the Chinese economy took off basis, we evaluate the economic policy should have a long-term perspective, encourage the government a little further away from the GDP.