SMM11, March 23: the trend of the world economy is rolling down, and no one is immune from it. China's economic data for October have all been released, as detailed in the article "October economic data at a glance at the current situation of the Chinese economy." What can China do about it under downward pressure?
Second, as the US continues to raise interest rates and China stands still, there is an increased risk of domestic capital outflows and pressure on falling foreign exchange reserves. Superimposed factors such as financial deleveraging, the liquidity of domestic funds will be obviously tense, and enterprises may have the possibility of breaking the capital chain. Therefore, under this background, the general environment to cut interest rates is the main theme. China has cut the standard three times since the beginning of this year. Interest rates have not changed, and the possibility of interest rate cuts will not be ruled out in the future.
October trade data have obvious export grab phenomenon, foreign demand has not fundamentally improved, on the contrary, continue to decline, under the premise of weak exports, economic development has to rely on their own.
1. Tax reduction and fee reduction
According to data from the World Bank, China's corporate tax burden is as high as 67.3%, which is significantly higher in the world's major economies and has room for substantial decline. At present, the main tax in our country is value-added tax. The characteristic of value-added tax must be that consumers will pay the bill eventually, which is also one of the reasons why all kinds of prices remain high. There are as many as hundreds of fees for enterprises, which can also be greatly reduced to increase corporate profits.
Tax cuts can reduce the costs of enterprises and stimulate the internal momentum of the economy. After enterprises and residents benefit, they can naturally expand consumption. In the early 1980s, as a result of the long-term practice of Keynesianism, the United States fell into serious stagflation. President Reagan implemented a series of policies after taking office, successfully controlling the two major problems of high inflation and high unemployment, and dragging the US economy out of the quagmire. At the heart of Reagan economics is tax cuts.
2. Fixed assets investment
The marginal effect of fixed asset investment has been diminishing in recent years, and fixed asset investment accounted for 77 per cent of GDP in 2017, compared with 61 per cent in 2010.
From January to September this year, infrastructure investment grew by only 3.3 percent compared with the same period last year, down 0.9 percentage points from January to August and 16.5 percentage points from the same period last year, directly dragging down the growth rate of fixed asset investment by 3 percent. It was the culprit for a 0.2 per cent fall in GDP in the third quarter from a month earlier. After infrastructure investment bottomed out in October and local government special debt funds are in place, infrastructure is expected to rebound further. Given that the increase in social finance has been halved, M2 growth rate innovation is low, manufacturing and real estate in the short term there is no bright spot.
3. Control of fiscal expenditure
The government should appropriately control fiscal expenditure, cut off some invalid investments, and ensure that the deficit ratio is within the controllable range, so as to avoid over-reliance on land finance. This is very important, we all know that we have to live within our means, if the debt is too heavy, it will be crushed, and then the tax cuts and fees may be wasted.
4. Help private enterprises
In the future, the problems of private enterprises will be the top priority, private enterprises in the previous situation is quite awkward, but the contribution of 60% of GDP has not been corrected. Recently, President Xi made a remark at the forum of private enterprises to wake up the dreamers. The spring of A shares has not yet arrived, and the spring of private enterprises may not be far away. On the way of China's continued opening up to the outside world, in times of economic difficulties, the more we should unite our own people, the rise and fall of private enterprises will increasingly become the key to the realization of Chinese Dream by the Chinese people. In order to help private enterprises out of difficulties, the government can help private enterprises into the local government assessment system, so as to improve the enthusiasm of local governments.
5. streamline administration and institute decentralization
The government should simplify administration and delegate power, gradually withdraw from the market, and let the market return to the market itself. This is the essence of neo-liberalism. In the past, China was deeply influenced by Keynesianism, and the government intervened too much in the market. After Keynesianism revealed its disadvantages, what the government had to do was to perfect the system construction in the process of gradually withdrawing from the market. After the withdrawal of the government, the market can still function freely, which is not only a test of the desire of the government, but also a test of the level of the government, but also the inevitable requirement of openness.
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