Thursday, February 19, 2009

How to expand domestic demand in China?

As we all know, expanding domestic demand is the first priority of Chinese government to stimulate economy. However, the pressure from housing, medical care as well as education are the largest obstacles which impede Chinese people from unfilling their pockets. The fear of losing money always brings the desire of making fast money. So what is the largest demand in China now? Not clothes, not food, not house, but money.
Money is commodity, for sure. If people don't want to buy clothes, food, etc., give them the chance to buy money. Make the illusion that he can buy more money with less cash. The clever Chinese government is doing that currently. Based on my estimation, they will boost another big bull market and let its value doubled. In that way, an illusion that there is a place where less cash can exchange for more cash will be created. It has been created again and again in the past and never failed. Then, government sell in the peak and raise thousands of billions.
The next step is to use that money to bail out companies, which were struggling on their decreasing export to abroad, but now can sell their productions to the government. Then, the government can sell those productions to its people for free or in large discount. In that way, the government acts as an intermediary agent, who successfully help the manufactures to sell out their goods.
Great, domestic demand is expanded at last!

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