China Europe International Business School Professor Xu Xiaonian believes it not possible for 4 trillion yuan investment to reverse the downturn in China's economy and suggests the distribution of 3,000 yuan or an equal amount of purchase vouchers for every citizen to stimulate consumption.
Huatai Securities held a conference on "China's Capital Market Investment Outlook 2009" in Nanjing, December 20, which targeted high-end customers. Xu Xiaonian said at the conference that 4 trillion yuan of public investment cannot reverse the slowdown in China's economy, and that it would be better to hand out the money directly to the public. Xu is a Professor of China Europe International Business School.
The growth rate in China's GDP will be 6-8 percent in 2009, anticipated Xu. Historical experience demonstrates that when the GDP growth rate drops to 6 percent, listed companies will experience negative profits. Xu advised investors to reduce investments in the stock market, which he thought will not turn for the better in 2009.
It is not possible for the 4 trillion yuan investment to reverse the downturn in China's economy, noted Xu. China has maintained a high economic growth rate for many years; overcapacity is therefore very common in many industries. Investment opportunities therefore lie in the service sector, not in manufacturing industry. Xu suggested the distribution of 3,000 yuan or an equal amount of purchase vouchers for every citizen to stimulate consumption.
However, Director of Huatai Securities Research Institute Qiang Ying held a different opinion. According to Qiang, the Chinese government will stick to a proactive fiscal policy to tackle economic problems during this untypical period. Huatai Securities is therefore optimistic in its perspective on a number of industry sectors: construction, iron & steel, cement, and railway equipment, all of which will be stimulated by the state's 4 trillion yuan investment. Sectors such as home appliances, medicine, food, retail and real estate will also benefit, according to Qiang.
(China.org.cn by Fan Junmei, December 23, 2008)