China Review News (CRN) recently published a review on the phenomenon of many of China’s local governments coming up with huge investment plans. The scale of these government investments are comparable to the central government managed “4 trillion” (in Chinese RMB) stimulus package that started in 2008. An example is Changsha, the capital city of Hunan Province, which just announced an investment plan of RMB 800 billion. The review pointed out that the income of typical Chinese local governments has declined significantly in the past year due to the adjustments that the central government has made in the area of real estate investments. With the apparent decline in the overall Chinese economy, the central government is loosening up currency and financial policies. However, the review expressed the belief that, if many local governments make un-coordinated investments, it may result in disastrous economic damage. It would be a better idea to manage market demand and stimulate private investments in the right direction.
Source: China Review News, August 2, 2012