How can China fight the current financial crisis and maintai(2)
2017-08-06 06:52
导读：In order to extend the domestic demand and stimulate the domestic market, the Chinese government should take the following effective measures. Firstly, the government should continue to put additional
In order to extend the domestic demand and stimulate the domestic market, the Chinese government should take the following effective measures. Firstly, the government should continue to put additional investments in the infrastructure projects. The Keynesian economists argue that fiscal stimulus raises the market for business output, raising cash flow and profitability, spurring business optimism. To Keynes, this accelerator effect means that government and business could be complements rather than substitutes in this situation. Second, as the stimulus occurs, gross domestic product rises, raising the amount of saving, helping to finance the increase in fixed investment. Finally, government outlays need not always be wasteful: government investment in public goods that will not be provided by profit-seekers will encourage the private sector's growth. That is, government spending on such things as basic research, public health, education, and infrastructure could help the long-term growth of potential output. In November 2008, the Chinese government announced that it will undertake an economic stimulus program to assist the domestic economy. A $586 billion economic stimulus spending package was announced that includes developing infrastructure projects as a means of sustaining the Chinese economy (the Earth Times). According to Keynesianism, China is on the right track and the government should continue to do so.Also,boosting per-capita income is a way to accomplish this.Keynes suggest to raise the per-capita income during the economic recession. He argued that to boost employment, real wages had to go down: nominal wages would have to fall more than prices. However, doing so would reduce consumer demand, so that the aggregate demand for goods would drop. This would in turn reduce business sales revenues and expected profits. Investment in new plants and equipment?aperhaps already discouraged by previous excesses?awould then become more risky, less likely. Instead of raising business expectations, wage cuts could make matters much worse. Further, if wages and prices were falling, people would start to expect them to fall. This could make the economy spiral downward as those who had money would simply wait as falling prices made it more valuable?arather than spending. Falling prices can make a depression deeper as falling prices and wages made pre-existing nominal debts more valuable in real terms.If all economy actors reduced their expenditure and cut wages, ?°they will all be worse off?±( Chang,2007:145). However, the current wage level in China is too low,which affects the healthy development of the consumer market. Low-wage policies become a barrier or domestic market development. Moreover,as the income gap widens, the rich consume luxury imported products . Therefore, the domestic consumer market is still in a state of atrophy. Low-wage policies underestimating the value of human capital, resulting in a vicious circle. low-wage policies is not conducive to enterprises to adopt advanced technologies and lock the enterprises in the development of labor-intensive industries. Opposing to low-wage policies does not mean suggesting high-wage policy, but facilitates the coordination of the relationship between accumulation and consumption.Beijing has seen some success with recent policy changes, such as raising the minimum threshold for income tax and hiking salaries for civil servants. But becouse of curruption ,many civil servants are already rich. Therefore the government should raise the income of teachers and workers.however, it is also not easy to be implimented because of corruption. As a result, the increased salary can not reach the people or reach them very late. Domestic demand cannot be boosted immediately.More importantly, the Chinese government should offer better education and social welfare, including medical insurance and pensions. That's because nervous Chinese today put too much money into "precautionary savings," They know they might get hit by a health-care bill, that they have to put their kids through school and also save for old age, because there is no pension system for 80% of the Chinese people(Chan,2006).To Keynes, excessive saving, i.e. saving beyond planned investment, was a serious problem, encouraging recession or evendepression depression. Excessive saving results if investment falls, perhaps due to falling consumer demand, over-investment in earlier years, or pessimistic business expectations, and if saving does not immediately fall in step, the economy would decline.Once the government takes on these responsibilities, people will be inclined to save less and spend more. On another aspect, according to the founder of Chinese reform Denxiaoping, China will let some poeple become rich, and then help the poor. Offering better education and social welfare is one of the best ways to help the poor. Unfortunately, that's not likely to happen in the near term.In addition, in order to promote consumption , the government should establish diversified financing channels to change the past planned economy under the conditions of the financing channels for a single pattern, such as playing the
