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WANT CHINA TIMES

Chinese investors are holding their collective breaths to see if the banking crisis predicted twoyears ago by renowned Chinese economist Li Zuojun will come to fruition in the next coupleof months.

Li, the deputy director at the Development Research Center of China's State Council, pennedan article in Sept 2011 predicting that there will be a major banking crisis in J uly or Augustthis year caused by excessive local government debt or a housing bubble.

Born in 1966 in south-central China's Hunan province, Li graduated with a doctorate ineconomics from Hubei's Huazhong University of Science and Technology in 1992. Mentoredby some of the most famous economics professors in China, Li has worked as a researcherand professor, teaching classes at his alma mater Huazhong and the Chinese Academy ofSocial Sciences, as well as real estate companies, investment banks and property developersacross the country.

He has been involved in several major domestic and international research projects andpublished dozens of articles in major national newspapers. He has also been a leader of morethan 20 major research reports for the State Council and penned more than 50 internalpapers while working in the private sector. Over the years, his writings have won four ChinaDevelopment Research Awards.

Li said back in 2011 that property developers were experiencing worsening cash flowproblems after their four main sources of funding sales, credit, the capital market and trustfinancing had all been on the decline or have hit bottlenecks. Despite having made a lot ofmoney from China's housing market in recent years, the developers believed they would notbe able to hold on for much longer if conditions did not improve.

Housing prices will definitely take a dive, Li said, though it is not clear how far. It is possiblethat the new Chinese government, led by president Xi J inping, could maintain tight controls tolimit the drop to about 10%-20%, though Li did not rule out the possibility of a US-like collapsewhere property prices dropped by as much as 50% to nearly 100% in some cases.

Li's astounding accuracy in predicting China's economy has led to him earning the nickname"China's most successful doomsayer."

GOOGLETRANSLATION

ZuoJun:ChinainJulyandAugust2013economiccrisiswillerupt

ThisarticlecomesfromFinancialNetwork

Rightnextgovernmentleaders,facedwithachoice,achoicetotakeoverfoam,meticulously

maintained,nolaterabletomaintain2015,or2016,thenthatisanevenbiggercrisis.The

secondoption,donottakethisbubble,thebubblesosoonaftertakingofficetorip;sothatthe

economiccrisismaybeinJulyandAugust2013

ZuoJun,the StateCouncilDevelopmentResearchCenterofResourcesand

Environmental PolicyResearchInstitutedeputydirector,was hiredasaconsultantor

apluralityoflocalgovernmentchiefeconomist.Underthe tutelageofeconomist.The

followingishis September27, 2011shouldbeinvitedHuazhong UniversityAlumni

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Association, inareportwillbemadewithinthe 2013Chinawillbethe outbreakof

theeconomiccrisis, the reportcontent.

The firstbig problemthe firstpoint the situation;

The firstbig problemofthe secondpoint the socialcrisis;

Onsocialissuessecondangle;

The firstbig problemisthethirdpoint the internationaleconomiccrisis,but

alsocontinued;

The secondmajorproblem the international economicoutlook.

Thefirstquestion,whatkindofcurrentdomesticand international situation,how,

howevolution?

And

future

situation

of

how

you

look,

how

evolution?

It

may

be

we

are

concernedabout.The secondquestion,insuchanew situation,our businessand

entrepreneurs, aswellaseachofushowtodo?

Thefirstbig problem the situation.The situationinthe future,thissituationis

reallyverysubtle,Iwouldliketofocushereonthe situationand totellyou three

questions:thefirstquestion,the futurewefacesomerelativelylargeadjustmenteven

crises.Thesecondquestioniswhetherthe futureishow the internationaleconomyan

evolutionarytrend.Thethirdisourdomesticshorttermeconomictrendsoverhow

big?The firstmostaroundthesethreeissues.

Thesecondmajorproblem,businessesand individualshow wedo? Thisrelatestochoosewhatkindofsectorinvestment,includingthechoiceofwhatkindofinvestment,

thereisacomprehensiveenterprisehowtorespondand soon.

Firsttalkaboutthe firstonebig problem the situation.

Thefirstsituationisaprobleminthe TwelfthFiveYearperiod,wemay haveto

happensomething.Onemightwanttohappenduringthesecondfivepossiblean

economiccrisistooccur.Itwas strange,isnot justaneconomiccrisisbrokedo? Just

outbreakoftheU.S.subprimemortgagecrisistriggeredadeclineinour exports,

economicgrowthdeclined.However,weChinesepeopledonot own the outbreakof

the economiccrisis,ourbanksdonotgobankrupt, weChinesepeopleseconomiccrisis

is brewing,and thatwhenitbroke? Ithinkitwas in2013,and why?For everyoneto

analyzefourreasons:

Thefirstreason,for economicreasons,economicreasonsleadtothe possibilityof

the outbreakofthe crisisthereare two,one isthe realestatebubble burst, theotheris

the localdebtcrisis.Ofcourse,thesetwo issuesare related,Ifocusfromthesecond

anglewitheveryonetalkingaboutthe localgovernmentsmainsourceofincomehas

two blocks,one isthe industrialand commercialtaxes,aswellasthe mostrecent

comingin2012,becausemanyofthesmalland mediumprivateenterprisesisnot the

economy.Some

local

governments,

industrial

and

commercial

tax

to

be

reduced

accordingly,the secondsourceofincomeisincomefromlandsales.Beginningthis

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year,manylocalgovernmentshavebeenlargereductionsinland,afew yearsago,50%

oreven3040%.Afew yearsago all weask the governmenttogivelanddevelopers

haverecentlybecome popularfor sometimethe governmentaskeddevelopers,when

you cometobuy myland.Why?Becausetheyare alreadyfacingbalanceofpayments

gap pressure,Beijinglandreserveloansayear250 billion,and theresinterestpressure

is verylarge,lightChaoyangDistrictlandbankloaninterestamonthonmorethan10million.Ifthe landcannotbesold,thenbalanceintrouble.Therefore,toreduce

businesstaxes,aswellasthereductionoflandrevenue,manylocalgovernmentsunder

alot ofstress.

Spendingit, butisincreased,two blocks spendingachunkisthe usualexpenditure

fromthenationallevel,thisisadefensespendingincreaseintroopswageincreases,the

SouthChinaSea,the aircraftcarrierwillneedtoincreaseinvestmentfromlocal

governments, ,but alsolargescaleinfrastructuretomoveforward,36millionunitsof

affordablehousingconstructionneedsgovernmentspending,strengtheningthe social

securityspendingtwo fullcoverageofthe needfor governmenttostrengthenwater

conservancyfacilitiesrequiregovernmentspending,vigorouslydevelopstrategic

emergingindustryneedsgovernmentspending,atall coststomaintainsocialstability

requiresgovernmentspending,sothe pressureisverygreatexpense.Theotherone,not

before,nowhave,and thatisthe arrivalofcentralizedrepayment,debtservicepressure

soon.Afew yearsago,fourtrillioninvestmentintheamountofdaysofcredit,was

veryhandsome,but not comeoutofthe pie,istoalso,fromthesecondhalfofthisyear,

the arrivaloftherepaymentperiodbegins,Mingaftertwo yearstorepaya4.6

trillion.WhytherecentYunnanRoad,Shanghai,ChangshaCityInvestmentand our

highways,etc.,begantoshowsomeoftheproblems,infact,thisisjusttip ofthe

iceberg,becausethearrivaloflargescalecentralizedrepaymentperiodand revenue

streamsasymmetrycausedenormouspressure,Soovertime,toaround2013,some

localgovernmentsmay gobankrupt, ofcourse,thereisthe army,putaguntoputhere,

who saidthe governmentgobankrupt? Governmentisnotbankrupt. Whosebreaking

capacity?Breakingthe banksassets,the moneyfromthe bank,the banksmoneycomes

fromwhere?Fromthe majorityofenterprises and peopleare breakingtheir

production.Thisisthefiscaland financialsystemicrisk,thisisthefirsteconomic

reasons,the reasonsfor the crisis.Beforeapotentialrealestatebubble burstcrisis

becauseofthe timedoesnot expand.

Thesecondreasonis the reasonthatthe internationalexternalreasons,afew years

ago our countrysrapideconomicdevelopment,whichhas animportantforce,isthe

largenumber

of

international

hot

money

flowing

into

China,

support

our

economy

bubble generation,thehot moneyisthebenefitsorreducethe ,speculative,thatcome,

say you can walkaway,heismainlydependingontheregionofthe returnon

investmentprofits.Thereasonnow tostayinChina,becausethe pastfew yearsChinas

economyhas maintainedrapidgrowth,thesespeculativereturnsstillrelativelyhigh,

but the Chineseeconomyisgoingdown,Chinaisgraduallyemergingrisks,thereare a

numberofinternationalorganizationsbeganrampantshortChinaconceptstocks.U.S.

economyisslowlyrecovering,the appreciationofthe U.S.dollarislikelytooccur,the

UnitedStatesalsomay raiseinterestrates,sotheseinternationalhot moneyatsome

pointtheremay bealargescalewithdrawal.ThiswillcauseusChineseeconomic

bubble burst, itisour responsetothe Chinesegovernmentisnot good.

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Thethirdreasonispoliticalreasons,the Chinesemustalsohavepoliticaleconomy

perspective.Why in2013,becausein2013the changeofgovernment.Beforethe change

ofgovernment,the currentgovernmentstermofofficeinthelastyear,thehighest

guidingideologyisnot anaccident,maintenanceofstabilityatall coststomaintainthe

stabledevelopmentofthe economy,whichisthe mainthing.

Rightnextgovernmentleaders,facedwithachoiceoftwo options.Alternatively,

thefoamfollowedinthe past,and thenmeticulouslymaintained,thenhewill

maintainituntilwhen?By2015atthe latestbeabletomaintain,or2016,thenthat

timeisanevengreatercrisis.The crisisofthattimewho istoblame,whodonot

know,thisisanoption.The secondoption,donot takethisbubble,the bubbleso

soonaftertakingofficetorip.Ruinedafterthe firsttimewillbringthepain,but for

anew leaderisagoodthing,becausethe responsibility isveryclear,isnot causedby

them,iscausedbythe front.Secondly,inthe foamdancingwithdowntoearthfeeling

is not the same,afterthebubble brokeuphecoulddowntoearth.Furthermore,the

new achievementseasiertocomeup, becauseitreducesthestartingpoint,afterthe

bubble burstperformanceisrelativelyeasytodotogether,oratthe startingpointis

hightimetogoupwardisverydifficult.Ingeneral,thenew leadership tookoffice,in

frontofthreemonths,outofpoliticalconsiderations, shouldinheritand carryforward

is certainlyprudent,and inthreemonths,Ibegantograduallyexposedsomeofthe

problemsthe formerterm,showinghis new the ideaofnew initiatives.Anenterpriseto

adoptanew chairman,are alsotrue.Sowhy say thatthe economiccrisiscouldbein

2013,mostlikelyinJulyand August2013(thesecondhalf).

Thefourthreason,shortand longbottomthreecyclesmay besuperimposed.Short

periodis35years,the currentcycleofthe economyisdown,thenexttwo yearsmaybe

tothe bottom.Thecycleisaperiodofaboutninetoten years,wethink1949,1957,

1966,1976,1989,1998,everydecadeorsoisgenerallygoingtotoss,thenfrom1998to

now has beenThereare morethanadecade,and itshouldcome.Originally08,09should

betohappen,but itwas laterpushedbackbecauseofpolicy,butitcannot bepushed

too far.Thereisalongperiodof60years,aperiodofsix decades,theyhavetocount

the periodofthe IChing.So, after2013,Chinamaywantaneconomiccrisisbrokeout,

the performanceoftheeconomiccrisis:someSMEsbankruptcy,somebanksgo

bankrupt, somelocalgovernmentsgobankrupt, thisisour nextsteptofacesucha

situation.

Bothbeforeand afterthe fivesecondperiod,theremay beasocialcrisisbroke

out.Because

of

the

economic

crisis,

it

may

also

lead

to

social

problems,

at

present,

downthe accumulationofavarietyofsocialconflictsoroutbreaksalsostormin.

Thefirstbig problemonthe secondpoint the socialcrisis

Iexplainedfromtwoangles:firstaperspectiveofour societyissick,sick

performancewas hot.

Thefirstheat,the Civilheat.Chinaisthe worldshardesttestcivilservants,

universityentranceexam,two orthreepeopleinthetestone,testPh.D.,atwenty

individuals can alsotesta.But the Chinesecivilserviceexam,thousandsofpeoplein

the lastone before the exam.Why doweXiaojiannaodaicivilserviceexam?Becausethe

richand powerfulcivilservantsand security,becauseweChinesegovernmenthas

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masteredmoreand morewealth,moreand morepower,moreand morecontrolofthe

assetsofthatlandistheChinesegovernment,avarietyofmineralisagovernment,is

the governmentsrighttotax,the poweroflifeordeathisalsothe government,many

importanttrademonopolyalsointhe handsofthegovernment,the Chinese

governmentwas amazing,everyonewantedtobecivilservants.Civilservicereformin

the backwardreaction.

Thesecondheat,SOEheat,heatthecentralenterprises, the countryback.Current

centralrateofthe incomeyear,smalland mediumprivateenterprises isthesum offive

hundred,Chinasstateownedenterprisesbyvirtueofcentralenterprisesmonopoly

privileges, suchasthe monopolyoflandresources,the monopolyofcreditresources,

monopolypricing,accesstoexcessprofits,whichreflectsour reforminbackwards.

Thethirdrealestatefever.Nationofrealestate,alittlebit ofpowerfulenterprises

are nowengagedinrealestate,Haier,Hisense,TCL,Youngor,Romon,Erdosall these

outstandingprivatesectorcompaniesare engagedinrealestatedevelopment,corporate

realestateinits interiorsomeproportionis70 80% ormore,Iaskedsomedomestic

chairmanand generalmanager,Isaid,why doyou engageinrealestatedevelopment

it, youare not doingverygoodfor you Industry?Prettybig do? Thenheasked,hesaid,

why Idonotengageinrealestatedevelopment?Idoengageinrealestatedevelopment

is areturnofmorethanseveraltimesIndustries, Iengagemyfoolish,thisissomeof

the largercompanies.ThenthoseSMEsdo? Thenherealestate,hedid not directly

engageinthe developmentstrength,thenheindustrialhollowing,industrydonotdo,

realestatespeculatorsfromWenzhou,Hangzhou,Scoop,ScoopfromHangzhouto

Shanghai,fromShanghaiScoopBeijing,fromBeijingScoopSanya.Thenthereisthe

strengthofsomeindividuals do, buyahouse,apersonbuydozensofsets.And then

peoplecannot affordhousing?Theytalkaboutthehouse,justameetingtotalkabout

the house,aslongaspeoplesee me, theyask,theteacher,you saythatthe priceisupor

tofall?Whenup, whendown?All thepeopleall therealestate.Thisshowswhatthe

problemis? Descriptionsick.

Thefourthheat,speculativefever,isnotarealestatestocks,stocksthatare not real

estatespeculators,not realestateonspeculationofagriculturalproducts,garlic,ginger

yourarmy,beansyou play,and nowspeculationfunds,loansharking,friedinvogue,

prevalenceofspeculation,doesthatindicate?Descriptionsick.

Thefifthheat,immigrantfever.Whenanofficertothe nakedofficials,

entrepreneurs havelittlestrengthtoimmigrants.ThisisChinascurrentsocialproblemsauthenticity.

Onsocialissuessecondperspective

Thegap iscausedbytoo largeanimportantcauseofsocialinstability,butalsoalot

ofpeopleonanimportantaspectofsocialdiscontent.

Wideningwealthgap ishowthe?

Thefirstchannel,taxation,sincethemid1990s,wehavestrengthenedthe

governmentregulationoftheeconomystrengthenedtaxedpriorityistoprotectthe

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nationaltax,our governmenttaxeseveryyeartomaintain20% 30% ofthe highspeed

growth,twicethreetimesthe GDP growthinthe incomeofurbanand ruralresidents,

manyofusrelishthegovernmenttookthisasanachievementofour GDP may beabit

ofwater,but the revenues, but realmoney.Thisshowswhattheproblemis? Helpus

fightthe governmentand ChinaLeadertobeaddedtothe extentoftheseearlytax cuts,

the tax revenuegap isnotonlyagap atall levels,aswellasgovernmentand business, the publicincomegap.Wealthisnow controlledbythegovernmenttoomuch.

Asecondchannel,investmentand financinginclined,inthisanticrisisprocess,

fourtrillioninvestmentoverthe amountofdaysofcredit,investedwhereto

go? Mainlyfor localinvestmentand financingplatformand largeenterprises, the

majorityofsmalland mediumenterprisesand privateenterprises, the majorityof

entrepreneurs get proportionisrelativelylow,itcausesafortune,especiallyin

propertyand incomewidening.

Thethirdchannel,monopolies,monopolycausedbythe wideningincomegap,

telecommunications, electricity,petroleum,petrochemical,finance,monopolies

monopolyprivilegebyvirtueofexcessprofits,the incomeofsomemonopolyindustries

is our generalcompetitiveindustryrevenueoften times.

Thefourthchannel,irrationaldistributionoflandrevenue.Wehavetwokindsof

landownership.One isthe citystate,aruralcollectives.Ruralcollectives,thiswas

constitutional,heisactuallyafake,sowhenthe landusedfor agriculturalproduction

purposes,heisthe collective,aslongasthislandtoberealized,the establishmentof

the development,inthe processpreciselyproducelargeamountsofLAT,but the

majorityofruralcollectivefarmersreceiveonly1020% ,7080% byall levelsof

government,

developers

away,

so

why

such

a

big

gap

between

urban

and

rural

areas

weare,why weChinesefarmersitisalwayspoorer,farmersinWesterncountriesas

longasthereisland,thenhemustbemiddleclass.

Testwhetherwesincerelysolveruralissues,the key isthatwecannot solvetwo

things:first,tonotgivefarmerslandownership;second,allowingfarmersnot

establishedFarmers.The formeristhelargesteconomicinterestsoffarmers,whichis

the largestpoliticalinterestsoffarmers.But thesetwo,weare afraidof. Ifwetake

ownershipoflandtothe farmers,orfarmers collective,our governmentfinanceson

landcollapsed,morethanhalfoflocalgovernmentrevenuesourcesgone.Therefore,it

causestheurbanruraldisparity.

Thefifthchannel,highpricescausedbythe wideningincomegap betweenrichand

poor.Highpricesare amechanismofredistributionofincomeand platforms.Someof

our peoplealifetimeaccumulatingalot ofmoneyand wanttoimprovetheirhousing

conditions,highpricesofthe threegenerationsofancestorsaccumulatedmoneyswept

away,all ofasuddentheircolorstothemiddleclass,thatmoneygonetoo?Toall levels

ofgovernment,banks, developerswheretogo.

Thesixthchannel,Chinasstockmarket,accordingtoWuJingliansaidthatevenif

the casinoisnotthe place.Sointhestockmarket,Chinastockmarketwho make

money?Asymmetricinformationtoinformationofthatpartyistomakemoney.Who

holdstheinformation?Listedcompanies,the Commission,the fundcompany

executives. For thosewho donot havethe information,themajorityofretailinvestors

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tomakemoneyisnotnormal,donot makemoneyisnormal,8090% are losing

money.Sothe stockmarketisaredistributionofwealthasaplatform.

Inadditiontothe abovesix oclock,the handsofthe peoplewehavemoney,they

put themoneyinthe bank,but inflationsothatthemoneyactuallydepreciate.Excess

ofinflationisthatinflation,thenissuingthe righthandsoftheGovernment,toprintmoremoneyinthe processistoletyourhairticketschangeprocess,whichisare

redistributionofwealth.How the wideningwealthgap,throughthesechannelstopull

him big!Onceayoungmantoldmethataftertheyear2000,Imonthtwo thousand

dollars,3800dollarsamonthnow,and nowthe 3800purchasingpowerofmoneynot as

goodasthe originaltwo thousanddollars,becauseofinflation.

Moreover,inthe year2000,nonew threemountains:Buy and medicaltreatment,

schooling.Now threenew mountainspressureup, and mademe3800dollars

disposabledeclinedsharply,soIask Li, mystandardoflivingisupordown?Hewas

tellingthe truth.

But thisdecade,Chinaseconomyhas maintainedrapidand steadydevelopment

indeed,whichiswhy alot ofpeoplerightnow are socialdiscontent,somepeoplean

Internetcontentnot look,onlytosee the titleofthe BSing,why hewas BSing?Hehas

emotions,feelingofsocialinjustice,sowhy shouldthe outbreakofasocial

crisis.Economiccrisiswillleadtoasocialcrisis,thenthiscrisismay alsobe

accompaniedwiththe outbreakoftheeconomiccrisis.

Economiccrisisand socialcrisisdoesnotmeanlet an, weuse historicalperspective

tosee.Peoplehavealwayshappens,monthalsowanes,cyclicalfluctuationsin

economicdevelopment,

this

is

normal,

we

have

gone

through

so

many

years

of

rapid

development,istherestofthe time.Isarainbowafterthe storm,sotothe 2013

outbreakoftheeconomiccrisisisagoodthingfor ustowin the longtermgrowth

opportunities.Meanwhile Forcedusthroughthiscrisiscantransitionand reform,so

eveniftheeconomiccrisishavenothingtofear.

Thefirstbig problemofthe thirdpoint,the internationaleconomiccrisisstill

ongoing.

Fromthemomenttheperformanceoftheworldeconomywillbeabletoseeit, just

the beautyoftheoutbreakofthedebtcrisisand the outbreakofthe debtcrisisisjust

one ofthe worldeconomiccrisiscontinuesepisode.U.S.economicpresenceinthreemajorissues:

Thefirstisadebtthathedid not wanttofallintotoodeepinLibya,becauseno

money,leavingBushtoObamaisafiscalmess,war isthe money.Not longago,the two

partiesadoptedadecisiononraisingthe debtceilingto14.3trillionbill,but the U.S.a

yearto$14.6trillionGDP,ifthe valueofGDP,morethanonce,itmeansthatayear

aftertheincomeofhardenoughtorepaythe interest,thisisjustdebt,theUnitedStates

therearemanyotherbonds, suchascorporatebonds, financialbonds, etc.,atotalof60

70trillion,isthe sum oftheglobalGDP ayear,ifthe UnitedStatesisanormalcountry,

whichhas longbeenbankrupt,and the reasonisnot bankrupt,becauseheisthe

overlordoftheworld,you canuse his dollarhegemonyexploitedpeoplesofthe world.

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Americassecondproblemisthatthe entityseconomicrecoverythanexpected.

Thethirdproblemisthe highunemploymentrate,currently9.1%,stillmore,the

U.S.governmentcaresaboutemploymentand unemploymentinparticular,because

theyare reallyservingthe government.WeChinesegovernmentcaresaboutmostis

GDP and fiscalrevenueand land,whichistheirownachievementsand theirown income.

EUeconomies,thereare alsothreemajorissues:

Thefirstproblemisthatweare alwaystalkingaboutthe Europeandebtcrisis.

Thesecondproblemisthe Eurobasecurrencytoo,becausehemonetary

unification,but nounifiedfiscal,the unevendevelopmentofvariouscountries,leading

toaseriesofquestions.

Thethirdproblemisthe agingpopulationinthewholeofEuropethereisthe

wholewelfaresociety,makingthe wholesocietyforwardvitalityand

underpowered. And the Japaneseeconomysincetheslumpinthe nineties,earthquakes,

tsunamisplustriplenuclearradiationcrisisitworse,negativeeconomicgrowth,sothe

Japaneseeconomyisnot optimisticaboutthe future.

Involvementofdevelopingcountriesinthe emerginginflation,Indiasinflation

was over10%,Russiahas morethan10%,morethan6%inBrazil,Chinathan6.5%.This

is the momentthe worldsmajoreconomies,the maincondition,fromthe situationof

theseeconomies,wecanseethatafterthe economiccrisisisnot over.Why isnot over

yet?First,emergingeconomiesoverthe past2012arapidrecoveryofbottombounce,but stimulusstimulusout ofthe stylusoutofthe heartbeatstronger.Aslongasbooster

awithdrawal,the economywillgodown.

Followedfromthehistoricalexperience,amajorcrisistakestimetocomeout.U.S.

GreatDepressionof1929,thereare two versions,onein1929to1934,atotaloffive

years,the secondis1929to1941,atotalof12years;1970soil crisislastedsevenyears;

80yearsofU.S.savingsand loancrisislastedsix years;1990sdebtcrisiscontinuesin

Japanfor eightyears;late1990sAsianfinancialcrisislastedfor fouryears,thenthe

crisiscomparedwiththe GreatDepression,not soserious,comparedwithother,atleast

asmuch,soexpect23yearsinthe past,isnot sosimple.Therefore,the international

economiccrisiswillcontinuefor theinternationaleconomiccrisiscontinuedtogiveus

what?Exportsbroughtgreatpressure,lackofexternaldemand.

Thefirstbig problemofthe fourthpoint,internationalresourcesand environment

crisis.

Nowinternationalcommoditypricesingeneralare high,globalwarming,natural

disasters, the mostimportantare relatedtoChina,1.4 billionpeopleinmass

consumption,and consumptionaffectthe environment,our countrycomparedwith

otherindustrializedcountries,Chinaaccountedfor led theworldsfirstcarbondioxide

emissions,

resource

and

environmental

pressures

affecting

their

own

development.

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Thefirstbig problemofthe fifthpoint,Americanhegemonybroughtaboutthe

crisisintheinternationalclashofcivilizations.

Americanhegemonybegan10yearsago,whenChinasinternationalstatuscamein

fifth,six,whilethe UnitedStatestosuppressChina,begantocreatetrouble,suchasthe

SouthChinaSea collisionincident,thebombingincidentEmbassyinYugoslavia,but bin LadensappearanceattractedAmericasattention,sothatthe UnitedStates

concentrateondealingwithOsamabinLaden,Osamabin Ladenisnowgone,the

UnitedStatesbegantofocusagainturnedtoChina,soinrecentyearsaroundusbegan

toengageinmilitaryexercises, war,suchasIraq,Afghanistan,NorthKorea,Taiwan

problem,the SouthChinaSea,the DiaoyuIslandsissue,Vietnamand other

issues.UnitedStatesbegantotakeadvantageoftradecompetition,supportavarietyof

antiChinaforces,antidumpingChineseproductssocomprehensivemeanstocontain

Chinasdevelopment.

Americascorenationalinterestsistomaintainits hegemony,againstall

opponents. Tocombatthe SovietUnion,the SovietUniondisintegrate, asagainstthe

euro,the U.S.manufacturingeventsinKosovo,inordertofightagainstthe Japanese,

thesigningofthe PlazaAccordforcedthe appreciationofthe yen bubble,sothat

longtermsluggishJapaneseeconomy,inordertocombatthe Asiantigers,Soros

makingafinancialcrisis.

NowturntoChina,Chinahas 1.4 bil lionpopulationisabig country,alonghistory

ofcivilizationfor thousandsofyears,nearly30yearstomaintain10% ofthehigh

growth,economic

output

has

been

routed

to

the

second,

in

accordance

with

this

trend

continues,10years15yearsthanthe UnitedStates,thisisdefinitelythe UnitedStates

can nottolerate.Now toseewhetherChinawillhavemorethanthe previous

compressivecapacityofthosecountries,and ifnot,thentheoutcomeisthe same.So

now Chinaisfacingamoresinisterinternationaldevelopmentenvironment,

surroundedbyfriendslessand less,who toldyou all day topursueGDP,big hat and

nocattle?Busyall daytoachievecatchupdevelopment,turntoovertake,super

regulatorydevelopmentsand othertargetsunderthreeyears,infact,weourselvesget

nothing,othersyou havetobearwithsuitableinternationalresponsibilities and

pressures.

Thesecondmajorproblem the internationaleconomicoutlook.

Internationaleconomicoutlookmainemphasisheresix points.

Thissix pointtwo yearsago,severalseminarsIhaverepeatedlyemphasized, and

now lookbackatmypredictionsare basically correct,includingthe September11

attacksonthe UnitedStatesafterthe outbreakofthe economictrendprediction,I

wouldsay lookatthe UnitedStateshowtodealwiththe September11incident,when

the UnitedStatesthereare two methodsavailable,the firstmethodismagnanimous

U.S.authorities,suchastheuse ofthismethodtodealwith,the U.S.economywill

continuetoprosper.Thesecondmethodisthe use ofmassiveretaliation,ifthisisthe

casesincetheU.S.economywilldecline.Infactthe U.S.usesmassiveretaliationto

handlethe incident,sureenough,the nexttimethe U.S.economybruised,battered,

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indicatingthatIwas forecastiscorrect.Anotheroneisafourtrillioninvestmentpolicy

aftertheintroductionofthe forecast,Ihad saidfourtrillioninvestmenttoeconomic

stimuluseffectcan lastuptoayear,inearly2009,whenIpredictedsecondhalfof2010

Chinaseconomywillgodown,whenChinaseconomyisVplusUshaped,but the

secondhalfof2010justinaneconomicturningpoint,the factthatinthethirdquarter

of2010Chinaseconomydoesgodown.Isay now is2013totheoutbreakofthe economicand socialcrisis,wecanverifywhatIsaidright.For the pasttwo years,the

economicsituationinthe judgmentofthesix sentencecanalsobesaidtobesix point

whereIinsist.

Thefirstpointisthe internationaleconomiccrisiswillcontinue.International

economywillcontinueatlow levelsfor atleast2to3years,whichwas two yearsago

thatthe firstsentence,itseemstrue,for reasonsalreadyexplainedearlierinthishere.

Thesecondpointistheinternationaltrade,investmentand employmentsituation

has improvedbut isstillnot optimistic.Internationaltradein2009droppedby13%,

thenreboundedin2010,althoughareboundin2011,but did not bounce backtothe

levelbeforethe internationaltradeisnow the mainproblemfacingtheinternational

tradeprotectionismresurgence,and thisisthe UnitedStatesand Europedeveloped

capitalistcountriesengagedintradeprotection,toengagewiththe past,mainlyin

developingcountries,dependingonthe characteristicsoftradeprotection,previously

developedemphasisonfreetrade,nowistheChineseemphasisonfreetrade,which

currentlykindoftradeprotectionismsignsofthe worldeconomyonChinaseconomic

development,especiallythe developmentofextremelyunfavorable.

ThethirdpointistheU.S.dollaralsodepreciatedfromthemediumand long

term.

Why

dollar

devaluation?

We

can

do

a

simple

analysis,

the

U.S.

national

debt

is

currentlyhigh,fromnow the UnitedStatesfollowingfourmethodscanbeusedto

repaydebt:first,the saleofstateownedassetstodebt;Second,the gradual

developmentofthe economy,the developmentofindustrytodebt;the third,bythe

refinanceolddebt;fourth,printingmoneytorepay.Thenthe UnitedStateswilltaketo

repaythe debtitthatway?U.S.willuse the firstmethodthatis becomingtobuy assets

torepayyou?CurrentlythelargestU.S.creditorisChina,the UnitedStatesisunlikely

toapplythismethodtosolvethe debtproblem.Theuse ofsecondand thirdmethodsto

repaydebtand itlookstooslowtootired.Weighmostlikelyafterthe U.S.approachis

toprintmoney,becausethismethodislowcost,higheffect.Theprintingofdollars

directbenefitsare:First,the directformationofpurchasingpower,asthe worlds

currencycan

be

consumed

directly.

The

second

is

adirect

reduction

of

debt

burden,

the

dollarstartedtodepreciatemorenaturalcreditorsinjured.Threeistoincreasethe

competitiveness ofU.S.exports.Fourisadirectreductionofthe fiscaldeficit.Fiveis

beneficialtothe WallStreetfinancialmarketactivities,asfinancialinnovation,financial

derivatives are inU.S.dollarsasameanstoreleasemoremoneyonWallStreetto

promotegreaterprosperity.U.S.dollarnow emboldenedgreatestcloutliesinits

possessionalargegoldreserves,the worstsituationistoabandonthe dollar,recreatea

new worldcurrency,and its virtue,but you caneasilyget rid oftheirhugedebt,sothat

the dollarwillcontinuetodepreciatenexttime.

Thefourthpointisthatanew roundofglobalinflationisinevitable.Infact,

inflationhas comeinemergingcountries,the developedcountriesare alsocoming,the EUhas reached3%, the UnitedStateshas morethan2%, thefuturewillevolvefurther,

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11

the firstreasonisthatcountriesinordertostimulatetheireconomieshavetakenlow

interestratepolicy,the policyofloweringinterestratesisdoubleedgedsword.Onthe

one handthe low interestratescanspurinvestmentand boostthe economy;whilethe

otherhand,itwillleadtoassetbubblesand inflation.The secondreasonisthat

governmentstakeinordertomaintainahighgrowthpolicyofprintingmoney,and

now inmanycountriesthroughtheissuanceofmoneytomaintainthe highinflationtostimulatetheeconomy,leadingtohighprices,creatingabubble economy.

Thefifthpointisthe globalindustrialstructureisacceleratingmolding.Mainlyin

threeaspects:First,increasedthe proportionofthe realeconomy,virtualeconomy

declined.Becausethe virtualeconomyhas triggeredthe financialcrisis,risk,sonowall

countriesinthe importanceoftherealeconomy;Second,the emergingindustryinthe

globaleconomicstructure,the proportionwillrise.Thesocalledemergingindustry

referstonew energy,energysavingand environmentalprotectionindustries,the

currentcrisisfacingthe worldsthree the energycrisis,environmentalcrisis,are

inseparablefromthe economiccrisistoresolvedevelopmentofemergingindustries;

threeemergingeconomicpowersintheinternationalcommunitystatusincreasethe

statusofWesterndevelopedcountrieswillbesomewhatweakened.

Thesixthpointisthe worldsmajoreconomies,the fiscaldeficitand thedebt

burden willhauntthe futuredevelopmentofthe worldeconomyfor sometime.With

the governmentspendingmore,lessincome,whichled tonationaldevelopmentbonds,

ifthe controllablerange,therewillbeconducivetonationaldevelopment,ifitexceeds

the scopeofittriggeredthedebtcrisis.

Itisobviousfromthesesix internationaljudgein2023thatinthenext five inthe

first

medium

term

economic

situation

is

still

not

optimistic.

The

six

big

trend

will

continuetoevolve.

BINGTRANSLATION

LiZuojun:August2013,Chinawillbreakouttheeconomiccrisis

ThisarticlecomesfromthefinancialnetworkonJune25,2013

Sept. 17, 2011 titled, Economic Crisis Will Befall China in 2013. The speech was presented at an internal meetingof the Changsha Alumni Organization of Huazhong University of Science and Technology,

Forresourceandenvironmentalpolicy,developmentresearchcenteroftheStateCouncilLi

Zuojun,DeputyDirectoroftheInstitute,washiredasconsultantsorbymultiplelocal

GovernmentChiefEconomist.FromtheEconomistWuJinglian.FollowinghisSeptember27,

2011,uponinvitationbytheAlumniAssociationoftheUniversityofscienceandtechnology,

inaninternalreportmadeby2013,Chinawillreportoftheoutbreakoftheeconomiccrisis.

1thfirstbigproblemsituation;

2ndlargestissuessocialcrisis;

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Governmentexpenditures,strengtheningwaterfacilitiesconstructionneedsGovernment

expenditures,stronglydevelopmentstrategyemergingindustriesneedsGovernment

expenditures,Tomaintainsocialstabilityatallcostsneededgovernmentspending,spending

agreatdealofpressure.Anotherpiece,notbefore,now,thatwasitsfocusonarrivalofthe

repaymentperiod,debtservicepressures.Afewyearsago,4trillioninvestmentvolumeof

credit,was

avery

handsome,

but

it

snot

pie

in

the

sky,

are,

starting

from

the

second

half

of

theyear,repaymentperiodstartedcoming,thenexttwoyearsto4.6trillion.Whyrecently

YunnanHighway,andShanghaiofcityvotedandweChangshaofHighwaywait,began

displayedoutsomeproblem,actuallythisjusticebergacorner,isbecausemassof

concentratedrepaymentperiodcomesandincomeflownotsymmetriccausedofhuge

pressure,soastimeofover,to2013beforeandafter,haspartlocalgovernmentmayto

bankruptcy,certainly,hasarmy,putbarreltohereaput,whosaidGovernmentbankruptcy?

Governmentwillnotgobankrupt.Whobrokeit?BreakingtheBank,moneyfromtheBank,

banksarewherethemoneycomesfrom?Fromthemajorityoftheenterprisesandpeople,is

theirproduction.Thisisthesystemicfinancialrisk,thisisthefirsteconomicreasons,causeof

thecrisis.Apropertybubbleburstbeforepossiblecrisisduetothetimeconstraintsdonot

expand.

Secondduetoexternalreasonswhyinternational,afewyearsagoourrapideconomic

developmentinChina,whichhasamajorpower,wasthatalargenumberofinternationalhot

moneyinflowsintoChina,supportingoureconomicbubblehasgeneratedhotmoneyis

increasinglylimited,andspeculative,willcome,andsaycango,hemainlydependsonthe

returnoninvestmentsinvariousparts.ArenowstayinginChina,becauseChinahas

maintainedrapideconomicgrowthinrecentyears,thesespeculativereturnisrelativelyhigh,

butdownChinaseconomy,Chinarisksemerging,someinternationalorganizationsbegan

aggressiveshortingChinaconceptstocks.UnitedStateseconomyslowlyrecovers,United

Statesdollarlikelyappreciation,UnitedStateswouldalsolikelyraiserates,sothese

internationalhot

money

is

likely

at

some

point

alarge

withdrawal.

This

results

in

US

China

economicbubbleburst,thisisbadgovernment.

Thirdreasonispoliticalreasons,mustalsohaveavisionofthepoliticaleconomyofChina.

Whyis2013,2013theGovernmentGeneral.IntheGovernmentbeforethegeneralelection,

withinthetermofthisadministrationinthelastyear,thehighestguidingprinciplejustdont

happen,stabilityatallcosts,maintainingthestabledevelopmentoftheeconomy,thatsthe

mainthing.

OntheleadershipofthenextGovernment,facedwithachoice,either.Oneoption,followed

bythelastbubble,meticulouslymaintained,thenhewilldefendwhatwhen?Maintainedby

2015at

the

latest,

or

2016,

so

that

time

is

abigger

crisis.

Who

has

the

responsibility

of

that

timeofcrisis,andwhodontknow,thisisanoption.Thesecondoption,notthebubbles,let

thefoambrokeawaysoonafterhetookoffice.Afterthebreak,firstbroughtaperiodof

painful,butfornewleadersisagoodthing,becausetheresponsibilityisclear,notcause

them,aretheresultofearlier.Secondly,thedanceonthebubblewithdowntoearthitisnot

thesame,afterthebubblebrokehimdowntoEarth.Furthermore,thenewrecordeasier,

sincebeginningofthereduced,afterthebubbleburstperformanceisrelativelyeasytodo,

otherwiseahighatthebeginningtosetthemupisverydifficult.InGeneral,thenew

leadershiptookoffice,infrontof35months,outofpoliticalconsiderations,toinheritthe

spiritmustbecarefully,andafter35months,itbegantoopenupsomeoftheprevious

questions,showingitsnewthinking,newinitiatives.AnenterpriseforanewChairman,also.

Sowhy

is

that

the

economic

crisis

may

be

in

2013,

most

likely

in

August

2013

(the

second

half).

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14

Thefourthreason,shortlonginthreecyclesofthetroughmaybesuperimposed.Short

period35yearcycle,thiscycletheeconomyisdown,tospecifytheyearaftermayhit

bottom.Cycleisaround910cycle,wethinkof1949,1957,1966,1976,1989,1998,every

decadeorsototossdown,thenfrom1998tothepresentaremorethan10years,shouldhave

arrived.08

09

is

to

have

happened,

but

later

postponed

it

because

policy,

but

cannot

push

too

far.Alsohavingalongcycle,a60yearcycleofthecycle,theycountthebookscycle.So,

around2013,thepossibleoutbreakofaneconomiccrisisinChina,theeconomiccrisis:some

SMEsbankruptcy,partBank,partofalocalgovernmentbankruptcies,thisisthenextstepwe

havetofacesuchasituation.

While35issues,couldalsobeasocialcrisis.Sincetheoutbreakoftheeconomiccrisis,may

alsoleadtosocialproblems,atpresent,thebuildupistheoutbreakofvarioussocial

contradictionsfromintensifyingorLurker.

Onthe2ndlargestissuessocialcrisis

Isetoutfromtwoperspectives:thefirstpointisthatoursocietyissick,sickishot.

Thefirstheat,heatforcivilservants.FreedoisChinascivilserviceintheworld,the

Universityentranceexam,entranceexaminationtoatwoorthreepeople,Drexam,oneoutof

tenortwentypeoplecanalsogetintoa.ButcivilserviceexamChina,thousandsofpeople

cantpasstheprevious.Whysharpenheadthecivilserviceexam?Becausecivilservantsrich

righthaspotentialhasguarantees,becauseweChinaGovernmenthasmasterhas

increasinglymoreofwealth,andincreasinglymoreofpower,controlhasincreasinglymore

ofassets,landisChinaGovernmentof,variousmineralisGovernmentof,taxofrightis

Governmentof,wieldabsolutepowerofpowerisGovernmentof,manyimportantof

industrymonopoly

is

in

Government

hand

in,

Chinese

Government

too

cattle

has,

everyone

arewantedtoDangcivilservants.Thermalresponseofthecivilservicereformastep

backwards.

Thesecondheat,heat,heatenterprises,StateownedenterprisesGuoJinminback.Currently

Centralenterprisesayearincomeisthesumofsmallandmediumenterprisestop500private

enterprises,StateownedenterprisesinChinabyvirtueofmonopolyprivileges,land

resourcessuchasmonopoly,monopolisticcreditresources,monopolypricing,accessto

excessprofits,whichreflectsourreformsastepbackwards.

Thethirdheat,hotrealestate.Universalisrealestate,slightlykindofstrengthofenterprise

noware

got

real

estate,

Haier,

and

Hisense,

and

TCL,

and

ya

Al

Gore,,

and

Luo

Mongolian,

andOrdosalltheseexcellentofprivateeconomicenterpriseareingotrealestate

development,someenterpriserealestateinitsinternalofaccountedforthanis7080%above,

IaskedhaddomesticofsomeChairmanandGeneralManager,Isaid,youwhytogotreal

estatedevelopmentdoes,youindustrialnotdohavequitegoodofdid?Prettybigone?Then

heasked,hesaidwhyIdontdorealestatedevelopment?Realestateismybrickandmortar

returnseveraltimesover,Idonotfuckmesilly,thisissomeofthelargercompanies.What

aboutthesmallandmediumenterprises?Hesreal,hedevelopsnopowerdirectly,sohes

industrialhollowing,industrydoesnotdo,friedfriedtoHangzhoufromWenzhou,fried

fromHangzhoutoShanghai,FRYfromShanghaitoBeijing,firedfromBeijingtoSanya.And

astrongindividual,buyingaHouse,onepersonboughtdozensofcopies.Thepeoplecannot

affordto

buy

it?

They

talked

about

the

House,

as

soon

as

you

meet

to

talk

about

the

House,

as

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15

longaspeopleseeme,heasked,teacher,yousaythatthepriceistogoupordown?When

up,whenfallen?Everyoneinrealestate.Thatmeanswhatstheproblem?Noteill.

Thefourthheat,speculativefever,eitherrealortradingstocks,eitherstockorreal,notreal

friedproducts,yougarlic,gingeryou,beansyoulikefirefunds,loanshark,popular

speculation,speculation

prevalent,

what

does

that

mean?

Note

ill.

Fifthheatofimmigration.Politicianswanttobenaked,entrepreneurshavealittlemore

strengthtoimmigrants.ThisistheauthenticityofChinesecontemporarysocialissues.

Secondperspectiveonsocialissues

Gapistoolargetobeanimportantreasonforcausingsocialinstability,isalsoanimportant

aspectofmanypeoplethesociety.

Howtowidenthewealthgap?

Firstachannel,tax,90generationmediumtermyilai,westrengtheninghasGovernmenton

economicofregulationstrengtheninghastax,priorityisguaranteesIRS,weGovernmentof

taxannuallykeep20%30%aboveofsuperhighspeedgrowth,twicetimesthreetimestimes

YuGDPandurbanandruralresidentsofincomegrowth,wemanyGovernmentonputthis

asachievementsrelish,weofGDPmaykindofwater,butrevenuebutreallygoldsilver.That

meanswhatstheproblem?OurGovernmentandcompetingreachedbottomlevels,earlyon

thetaxcuts,fiscalincomedisparityisnotonlythesectionsofthegapalsowidenedincome

gapbetweenGovernmentandbusiness,thepublic.Toomuchgovernmentcontrolofwealth

now.

Thesecond

channel,

slope

of

the

investment

and

financing,

in

the

middle

of

the

anti

crisis,

4

trillionofinvestments,hypervolumeofcredit,investmentandwhere?Mainlytolocal

financingplatformsandlargeenterprises,themajorityofsmallandmediumenterprisesand

privateenterprises,andlowertheproportionofentrepreneursget,resultinginfurther

wideningofthewealth,particularlyinpropertyandincome.

Thethirdchannel,monopoly,monopolyofincomedisparity,telecommunications,electric

power,petroleum,petrochemical,finance,monopolyprivilegesbyvirtueofmonopoly

receivedexcessprofits,monopolyincomeisincomeadozentimesinourcompetitive

industry.

Afourth

channel,

land

income

distribution

is

not

rational.

We

have

two

types

of

land

ownership.AcityState,aruralcollective.Ruralcollectivealldoes,thisisConstitution

providesof,heactuallyisafakeof,sodanglandasagriculturalproductionusesofwhen,he

iscollectivelyowned,aslongasthislandtovariableare,togotdevelopment,inthisprocess

inthepreciselyproducedlargeoflandVAT,butgeneralruralfarmerscollectiveonlygot10

20%,7080%islevelsGovernment,anddeveloperstookhas,sowhyweurbanandrural

wealthgapsolarge,whyweChinafarmersalwayscomparisonpoordoes,Farmersin

Westerncountriesaslongastheland,thathemustbemiddleclass.

Testofwhetherwereallysolvetheproblemsofagriculture,thekeyiswecanaddresstwo

things:first,togivefarmerslandownershipand,secondly,Yundoesnotallowfarmerstoset

upfarmers

Association.

Former

farmers

maximum

economic

benefits,

which

is

the

largest

politicalinterestsoffarmers.Butthesetwo,wecant.Ifwegavethelandtothefarmersor

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16

farmers group,ourGovernmentlandfinancecollapsed,morethanhalfoflocalgovernment

revenueisgone.Therefore,resultsinurbanruralwealthgap.

Thefifthchannel,highpricescausedbythewideningincomegapbetweenrichandpoor.

HighHousepricesisoneoftheincomeredistributionmechanismsandplatforms.Wehad

somepeople

alifetime

to

accumulate

alot

of

money,

to

improve

housing

conditions,

high

accumulationofthreegenerationsofancestorsinthepriceofmoneysweptawaybackin

shapetogotomiddleclass,wheredoesthemoney?GototheGovernments,banks,

developers.

Thesixthchannel,Chinasstockmarket,accordingtoWuJingliansaidis,whereeventhe

casinosarenotasgoodas.Onthestockmarket,whotheChinesestockmarkettomake

money?Informationasymmetriesofinformation,thatpartyismakingmoneyWhocontrols

information?Listedcompanies,securities,fundcompanyexecutives.Asforthosewhodonot

masterthemajorityofindividualinvestorstomakemoneyisnotnormal,notmakingmoney

isgood,8090%islosingmoney.Sothestockmarketisalsoaplatformofwealth

redistribution.

Inadditiontothesesixpoints,weareinthehandsofthepeopleandthemoneythey

depositedthemoneyintheBank,butactualinflationsothatthesemoneydevaluation.

Inflationisexcesscurrencyinrealterms,thenoteissuingrightsinthehandsofthe

Government,howisyourtickettogettheprocessofprintingmoney,itisalsoarealignment

ofwealthredistribution.Howtowidenthewealthgap,pullinghimthroughthesechannels!

Onetime,ayoungmantoldme,beforeandafter2000,Im$2000amonth,now$3,800a

month,nowthepurchasingpowerof$3,800isworsethan2000dollarsbecauseofinflation.

Notonlythat,butnonewthreemountainataround2000:buyhard,difficult,gotoschool.

Newthree

mountains

press

right

now

makes

me

$3,800

disposable

fallen

sharply

as

a

proportionofthemoney,soasktheteacher,mystandardoflivingisrisingordecreasing?He

wastellingthetruth.

ButthistenyearsChinaseconomyhasmaintainedfastandstabledevelopment,whichis

whyalotofpeoplenowonsocialdiscontentnow,someInternetaccess,withoutreadingthe

contents,onlytoseethetitleManiangwhyheManiang?Hewasinamood,socialinjustice,

sowhywouldasocialcrisis.Theoutbreakoftheeconomiccrisiswilltriggerasocialcrisis,

thecrisisisalsopossiblewiththeoutbreakoftheeconomiccrisiswereaccompaniedby.

Economiccrisisandsocialcrisisdoesnotmeanthedayouttogounnoticed,welookto

history.One

unexpected

good

or

bad

fortune,

Moon

Moon

has

shine,

periodic

fluctuation

of

economicdevelopment,thatsnormal,weareaftersomanyyearsofrapiddevelopment,is

therestofthetime.Isarainbowafterthestorm,sountil2013,outbreakofaneconomiccrisis

isagoodthing,winningopportunitiesforourlongtermdevelopment.Throughthe

restructuringandreformofthecrisishasforcedus,soevenifthecrisisitsnotsobad.

3rdofthefirstissue,theinternationaleconomiccrisiswilllast.

Fromthepresentperformanceoftheeconomiesoftheworldwillbeabletosee,justusdebt

crisisandEuropeandebtcrisisisjustaninterludeoftheworldeconomiccrisiscontinued.

UnitedStateseconomytherearethreemajorissues:

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17

Firstisheavilyindebted,hewasnotinLibyaintoodeep,becauseofnomoney,Bushleft

Obamaafiscalmess,warisformoney.Notlongago,Twopartythroughhasonimprove

bondsceilingto14.3trillionofBill,butUnitedStatesayearsofGDPon14.6trilliondollars,if

onceoverGDPofvalue,onmeanswithyihouayearshardproceedsofincomealsoenough

reimbursementinterest,thisjustbonds,UnitedStatesalsohasothermanydebt,like

Enterprisedebt,

financial

debt

wait,

Trojan

has

6070

trillion,

is

global

ayears

GDP

of

sum,

UnitedStatesifisgeneralnational,itsearlybankruptcyhas,isnotbankruptcy,becauseheis

worldShangofOverlord,canusingheofdollarshegemonyexploitationworldpeople.

UnitedStatesofthesecondissue,istherecoveryoftherealeconomythanexpected.

Thethirdproblemisthehighrateofunemployment,stillisabove9.1%,UnitedStates

Governmentcaresaboutemploymentandunemployment,becausetheyreallyservethe

Government.WeChinesecareaboutGDPandlandandrevenue,thatis,hispolitical

achievementsandhisincome.

EUeconomy

there

are

three

major

issues:

ThefirstquestionthatwealwaystalkabouttheEuropeandebtcrisisnow.

Secondissueisthebasecurrencyoftheeuro,becausehehadMonetaryUnion,butno

unified,unbalanceddevelopmentinindividualcountries,ledtoaseriesofquestions.

ThethirdissueistheentireEuropeanpopulationageingalsobenefitssocietyasawhole,

makesthewholelackofvitalityandimpetustosocialprogress.Japaneconomy90justfell

apart,earthquakes,tsunamisandthetriplecrisisofnuclearradiationmakesitworse,and

economicgrowth,Japanseconomicfutureisnotoptimistic.

Emergingdevelopingcountriessufferfrominflation,Indiasinflationhadexceeded10%,

Russiamorethan10%,Brazilmorethan6%,morethan6.5%China.Thatisnowtheworlds

majoreconomiesmainlyfromtheirsituation,wecanseethat,aftertheeconomiccrisisisnot

over.Whynotoveryet?Firstofall,thepasttwoyearsseenrapidreboundattheendofthe

recoveryinemergingeconomies,butpolicystimuli,shotout.Assoonasshotout,the

economyisdown.

Followedbyhistoricalexperience,agreatcomingoutofthecrisisistotime.UnitedStates

1929yearsoflargedepressionhastwospeciessaying,ais,1929to1934,totalfiveyears,IIis

1929to1941,total12years;70generationofoilcrisiscontinuedhas7years;80generationof

UnitedStates

storage

credit

crisis

continued

has

6years;

90

generation

Japan

of

bad

crisis

continuedhas8years;90generationlateofAsiafinancialcrisiscontinuedhas4years,sothis

fieldcrisiswithlargedepressioncomparedtodidntsoserious,withotherofcomparedto,at

leastquite,soexpect23yearspast,Notthatsimple.Sotheinternationaleconomiccrisiswill

last,theinternationaleconomiccrisiswillbringuswhat?Exportsbroughtabouttremendous

pressure,insufficientforeigndemand.

4thsalesfirst,internationalresourcesandenvironmentalcrises.

Internationalcommoditypricesoverallarehighernow,globalwarming,naturaldisaster

prone,themostimportantarerelevanttoChina,1.4billionpeopleofmassconsumption,

consumerimpact

on

the

environment,

compared

to

other

industrialized

countries,

China

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18

dominated,carbondioxideemissionsintheworldsfirst,pressureonresourcesand

environmentaffecttheirowndevelopment.

5thforthefirstissue,ofdancebringsinChinaandtheinternationalcrisisoftheclashof

civilizations.

SinoUSdance10yearsQianonbegan,thenChinainternationalstatusrowin

diwuliuming,andUnitedStatestosuppressedChina,onbeganmanufacturingincidents,

asseahitmachineevent,bombingresidentSouthEmbassyevent,butbinLadenofappeared

attracthasUnitedStatesofattention,letUnitedStatesconcentratedpoweronfuladeng,now

binLadengohas,UnitedStatesbeganputattentionagainsteeringChina,soinrecentyears

beganinwearoundgotmilitaryexercises,andlaunchedwar,asIraq,andAfghanistanwar,

NorthKoreaproblem,Taiwanproblem,seaproblem,TheDiaoyuIslandissue,VietNam,and

soon.UnitedStatesbegantousetrade,supportingantiChinaforces,antidumpingof

Chineseproducts,andmorecomprehensivemeanstocontainChinasdevelopment.United

Statesnationalcoreinterestsistomaintaintheirhegemony,againstallopponents.Tocombat

theSovietUnion,divideanddemoralizetheSovietUnion,againsttheeuro,UnitedStatesmanufacturingeventsinKosovoforthefightagainstJapan,signedthePlazaaccordforcing

theyenbubble,Japanlongtermeconomicdoldrums,tocombatAsiasfourlittledragons,

Sorosmadethefinancialcrisis.

NowitsuptoChina,andChinaisagreatpower,with1.4billionpeople,hasalonghistoryof

thousandsofyearsofcivilization,nearly10%percentformorethan30yearsofhighgrowth,

economicoutputhasrankedthesecond,basedonthistrend,10,and15,overUnitedStates,

thismustbetheUnitedStatescannottolerate.CanChinanowthanbeforethecountry

strongerunderpressure,ifnot,thentheoutcomeisthesame.Chinanowfacesahostile

internationalenvironmentfordevelopment,lessandlesspeoplearound,whotoldyouto

pursueGDP,animpudentattempttorepresentthedefeatasavictory?Busyalldaytodocatchupwithdevelopmentandcurvepasses,Superregulationobjectivesofdevelopment,a

differenceofthreeyears,infact,wedidnthaveanything,someoneisaskingyoutoassume

withcorrespondinginternationalresponsibilityandstress.

SecondbigproblemInternationalEconomicOutlook.

InternationalEconomicOutlookhere,mainemphasisonsixpoints.

ThissixapointsintwoyearsQianofnumbertimesseminarintheIrepeatedlytostressed

had,nowbackheadseeseeIthenofforecastbasicallyareiscorrectlyof,whichincludingon

911eventoutbreakHouUnitedStateseconomictrendofforecast,IthenonsaidseeUnited

Stateshowtoshould911event,thenUnitedStateshastwospeciesmethodcanselected,firstspeciesmethodisUnitedStatesauthoritiesmagnanimity,asusedthismethodtoshould,

UnitedStateseconomicwillwillcontinuestoprosperity.Thesecondmethodistheuseof

massiveretaliation,ifthatisthecaseUnitedStateseconomywilldecline.InfactUnitedStates

workthroughthemassiveretaliationtothisincident,andsureenough,UnitedStates

economyovertherestofscarred,sapped,indicatingthatmypredictionwascorrect.Alsoais

on4trillionofinvestmentpolicyintroducedHouofforecast,Ithenonsaid4trillion

investmentoneconomicstimulusofeffectupcancontinuedayears,in2009earlyofwhenI

forecast2010secondhalfofChinaeconomicwillwilldowngo,thenChinaeconomicisvplus

ushaped,but2010secondhalfofjustiseconomicofinflectionpoint,factsprovedin2010

thirdquarterChinaeconomicdoesdowngo.Ishouldsayrightnowiseconomicandsocial

crisisin2013,wecanexaminemyright.Forjudgingtheeconomicsituationmorethantwoyearsofsixwordcanbesaidtobesixmainpointshere,andIinsiston.

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19

1thinternationaleconomiccrisiswillcontinue.Internationaleconomyremainslow,atleastin

23,itwastwoyearsagothatthefirstsentencenowseemstrue,forreasonsexplainedearlier,

Iamnotgoingtosayanymore.

2ndinternational

trade

investment

and

the

employment

situation

is

eased,

there

is

still

optimism.Internationaltradein2009declinedhas13%,thenin2010appearedhasrebound,

whilein2011alsohasrebound,butalsodidntreplytoreboundQianoflevel,international

tradenowfacedofmostmainofproblemisinternationalprotectionismagainrise,andthisis

beautyEuropedevelopedcapitalismnationalingottradeprotection,withpasttodeveloping

mainlygottradeprotectionoffeaturesdifferent,yiqianisdevelopedstressedfreetrade,now

isChinastressedfreetrade,Currentsignsoftradeprotectionismonthedevelopmentofthe

worldeconomywerenegativeonChinaseconomicdevelopment.

3rdisthemediumandlongtermfallinthedollar.Whythefallinthedollar?Wecanmakea

simpleanalysis,UnitedStatescurrenttreasurieshigh,nowUnitedStatesfollowingfour

methodsmay

be

used

to

pay

off

debt:

first,

the

sale

of

State

owned

assets

in

debt;

second,

the

progressivedevelopmentofeconomicdevelopmentindustrydebt;thethird,takenewdebts

andolddebts;IV,printingmoneytopay.Onewaythenutaketopayoffthedebt?United

Stateswilladoptthefirstapproachistobuyassetstopayhisdebts?CurrentUnitedStates

biggestcreditorsareChina,UnitedStatesisunlikelytoadoptsuchasolutiontothedebt

problem.Secondandthirdwaytopayoffdebtandlookedslowandtired.BalanceUnited

Statesthemostpossiblewayistoprintmoney,becausetheeffectsofthislowcost,high.Print

directlybenefits:oneisdirectlypurchasingpower,asaworldcurrencycandirect

consumption.Secondistodirectlyreducethedebtburden,startingfallinthedollar,natural

creditorswereinjured.ThreeistheUnitedStatesrisingexportcompetitiveness.Fourisa

directreductionofthefiscaldeficit.FiveactiveisbeneficialtoWallStreetfinancialmarkets,

financialinnovation,

financial

derivatives

are

in

United

States

dollars

as

ameans

of

issuing

morecurrencypromptedtheWallStreetmarketmoreprosperous.UnitedStatesagainstthe

dollarnowhavenofearofgreatestenergyislargegoldreservesattheirdisposal,theworst

situationistofinallygiveupthedollar,againcreatinganewworldcurrency,butitcaneasily

shakeoffitshugedebts,sonexttimewillcontinuetofallinthedollar.

4thisanewroundofglobalinflationisinevitable.Infact,inflationinemergingcountrieshas

arrived,comingindevelopedcountries,theEUhasreached3%,UnitedStatesmorethanthe

2%,willfurtherevolveinthefuture,thefirstreasonisthatStatesadoptapolicyoflow

interestratestostimulatethedomesticeconomy,policyofloweringinterestratesisadouble

edgedsword.Lowinterestratescanspurinvestmentandboosttheeconomyontheone

hand,on

the

other

hand

but

could

lead

to

asset

bubbles

and

inflation.

A

second

reason

for

Governmentstoadoptapolicyofprintingmoneyinordertomaintainhighgrowth,butin

manycountriesisthroughtheissuingofbanknotestomaintainhighinflationtostimulating

theeconomy,leadingtohigherprices,creatingabubble.

5thistheglobalindustrialstructureisbeingaccelerated.Mainlyinthreeaspects:first,real

economicweightrise,sharevirtualeconomydeclined.Becausevirtualeconomyraisesriskof

financialcrisis,sonowallattentiontothedevelopmentoftherealeconomy;second,theshare

ofemergingindustriesintheglobaleconomicstructurewillrise.Thesocallednewindustries

meannewenergy,energysavingandenvironmentalprotectionindustries,thethreecurrent

globalcrisesresolvetheenergycrisis,theenvironmentalcrisis,theeconomiccrisisis

inseparablefrom

the

development

of

emerging

industries;

third,

the

emerging

economic

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20

powerrisingstatusintheinternationalcommunity,willdiminishthestatusoftheWestern

developedcountries.

6thisfiscaldeficitsanddebtburdensoftheworldsmajoreconomieswillbetroubledfor

sometimeinthefuturedevelopmentoftheworldeconomy.Asgovernmentspending,less

income,this

leads

to

national

bonds,

if

within

the

controllable

range

will

also

be

conducive

to

thecountrysdevelopment,ifitisthrownoutofthedebtcrisis.

Judgingfromthesixitiseasytoseetheinternationalinthenexttwoorthreeyearsthatis

TwelveFive thefirstmediumtermeconomicsituationremainsbleak.Sixlargetrendthat

willcontinuetoevolve.

Author:LiZuojun (Editor:ChenJun)

Keywords:LiZuojun

EPOCHTIMESSYNOPSIS

AneconomicsresearcherinChinasStateCouncil,theequivalentoftheChineseregimes

cabinet,predictsaneconomicmeltdowninthecountrynextyear.Hisremarks,whichwere

madealmostayearago,weregivenrenewedattentionrecentlyasChinaseconomyactually

beginstoslowdownandhispredictionsstarttolooknotfaroffthemark.

LiZuojun,aresearcherwiththeNationalDevelopmentandResearchCenteroftheState

Council,deliveredaspeechonSept.17,2011titled,EconomicCrisisWillBefallChinain

2013.ThespeechwaspresentedataninternalmeetingoftheChangshaAlumni

Organizationof

Huazhong

University

of

Science

and

Technology,

according

to

Deutsche

Welle.

RecentlythespeechhasspreadwidelyonChinasInternet.

AnAug.23postonWeibo,Chinaslargestsocialmediasite,wasforwardedmorethan9,000

times.Theinformationwasalsowidelyreportedbymainlandmediaportals,includingSohu

andSina.

Insummary,Linotedthatthebankruptciesofsmallandmediumsizedcompanies,banks,

andlocalgovernmentsareallsignsofanationwideeconomiccrisis.

Ligavefourreasonsforhisprediction:

Economic

AburstingrealestatebubbleandtheworseninglocaldebtcrisesaretwocausesLiattributes

toapotentialeconomicmeltdown.

Hereasonsthattheoveralleconomicdownturnledtofinancialhardshipforsmalland

mediumsizedcompanies,whichsubsequentlyresultedinreducedindustrialandcommercial

taxrevenues.

Local

governments

suffered

from

reduced

revenues

due

to

the

depressed

real

estateindustry.

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21

Nevertheless,localgovernmentsareunderalotofpressuretokeepspendingmoremoneyon

itemssuchasnationaldefense,localinfrastructure,housingconstructionandsocialinsurance

policies,improvementofhydraulicstructures,and,mostimportantofall,maintainingsocial

stability.

Atthesametime,maturityoflocaldebtsisaddingfurtherpressureandforcingsomelocal

governmentsintobankruptcy.Thiswillinevitablyleadtobanksalsodeclaringbankruptcy,

anddebtsbeingpassedontoChinesecitizens.Asaresult,Lipredictsafullblowneconomic

crisisisimminent.

HotMoney

ChinaseconomyisslowingdownwhiletheUnitedStatesisexperiencinganeconomic

recovery,thereforelargesumsofinternationalhotmoneywillflowoutofChina.Thisdrain

willalsocontributetoaneconomicimplosion,hesays.

Political

Chinas2013leadershiptransitionbringsnewleaderstothehelmthatmightnotbeso

anxioustoaddressChinaseconomicwoes.Lithinkstheywontexposeanyofthepast

problemsuntilthreetofivemonthsaftertheytaketheirpositions.So,themostlikely

recognitionofaneconomiccollapse,accordingtoLisestimation,isJulyorAugustof2013.

Followingtheeconomicbubblebursting,therewillbeasubsequentperiodofsuffering.But

forthenewleaders,thisisnothingbad,sincetheyarenottoblameforthesuffering,Lisaid.

Furthermore,Withtheeconomicbubblebursting,thenewleadershipcanadoptpractical

approaches.

New

political

achievements

will

be

gained

more

easily,

since

the

starting

pointiscomparativelylow.

Cycles

Thevalleysofshortterm,midterm,andlongtermcyclesconvergein2013,Lisaid.

Ashorttermcyclespansthreeorfiveyears.Currently,thiscycleismovingdownwardsand

willreachbottomwithinthenexttwoyears,Lisaid.

Amidtermcyclespansaboutnineortenyears.AccordingtoLi,midtermcyclesinChina

occurredalmosteverytenyears,in1949,1957,1966,1976,1989,and1998.Lisaidithasbeen

overadecade

since

1998,

and

the

cycle

should

be

around

the

corner.

Initially,

this

cycle

shouldhavearrivedin2008or2009.Economicpoliciesatthattimedelayedthecyclesvalley,

butitshouldntbedelayedfortoomuchlonger,hesaid.

Thereisalsoalongtermcycle,whichspans60years,Lisaid,givinghisspeechatraditional

ChineseinflectionwithareferencetotheIChing,alsoknownastheBookofChanges,a

classicChinesetextondivination.FromLisestimationthiscycleisalsoapproaching.

Withtheeconomiccrisis,socialproblemswillalsoresult.Thecurrentintensificationofmass

incidents,orlarge,oftenviolentprotests,canbeseenasaforewarningoffutureturbulence,

hesaid.

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22

CHINASCOPEVERSION

ChinasEconomyFacesNineMajorChallenges

WrittenbyTS,AEF,AT

[EditorsNote: LiZuojun,DeputyDirectoroftheInstituteofResourcesandEnvironmental

PolicyResearchattheDevelopmentResearchCenteroftheStateCouncil,publishedanarticle

discussingthemajorproblemsthattheChineseeconomyfaces.TheDevelopmentResearch

CenteroftheStateCouncil(DRC)isaleadingpolicyresearchandconsultinginstitution

directlyundertheStateCouncil.AccordingtoLi,thenineproblemsare:decliningeconomic

growth,inflation,economicbubbles,thechangingeconomicgrowthengines,adjustmentsin

ourindustriesandregionalbusinessstructures,environmentalconstraints,thesocialcostsof

development,thedeterioratinginternationalenvironment,andresistancetoreform.The

followingareexcerptsfromLisarticle.][1]

Nowthat

the

stage

of

China

s30

years

of

rapid

growth

has

ended

and

the

restructuring

and

developmentstagehasbegun,theChineseeconomyfacesthefollowingproblemsand

challenges.

TheChallengefromtheSlowdowninChinasEconomicGrowth

First,Chinaseconomicgrowthisslowingdown.Itisafactandatrend.The2012second

quarterGDPgrowthratedroppedto7.6percent.Thisisnottemporary,but,rather,itreflects

themarketsdirection.

Theslowdownineconomicgrowthmeansthatthedemandforproductshassubsided,orders

havedeclined,

and

markets

have

shrunk.

It

means

that

many

companies

may

incur

losses

to

thepointofbankruptcy,leadingtoareductioninjobs.Animportantreasonwhywepursued

rapideconomicgrowthinthepastwastosolvetheunemploymentproblem.AsChinas

economicgrowthhassloweddown,thepressureofunemploymenthasincreased.Wemust

constantlyadapttotheeconomysslowingdownandactivelyrespondtothechallenge.

TheChallengeofLongtermInflation

In2011ChinasCPIwasashighas6.5percent.InJune2012itdroppedto2.2%,butmay

reboundanytime.Thepasttwoyearssawnegativeinterestrates(ratesthatwerelowerthan

inflation).Nowwefinallyhavepositiveinterestrates.Whatweneedtobeconcernedaboutis

whetherinflationary

pressure

is

ashort

term

problem,

an

intermediate

term

problem,

or

a

longtermone.Itismostlikelyanintermediatetolongtermproblem.Sowemustincrease

ourtoleranceforinflationandourresilience.

Whathaslongterminflationbroughtus?Inflationmeansthatthewealthofthepeoplehas

shrunk,thattheirstandardoflivinghasdeclined,thatthewealthhastransferredfromone

socialclasstoanother,thatthegapbetweenrichandpoorhaswidened,thatthecostsforthe

developmentofsomeindustrieshaverisen,andthattheenvironmentforeconomic

developmenthasdeteriorated.

TheChallengeofAccumulatingEconomicBubbles

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23

Alongwiththerapideconomicgrowth,economicbubbleshavealsoaccumulated.High

housingpricesareonegoodexampleofaneconomicbubble.Highpricedassetsrepresent

anotherbubble.Wenolongerengageinmanufacturing.Rather,wehavealldivedintothe

financialmarket,whichinandofitselfhascreatedabubble.Manyindustriessufferfrom

seriousovercapacity,anotherbubble.Manylocalgovernmentshaveinvestedagreatdealin

developmentand

spent

heavily

on

financing,

directly

engaging

in

the

business

of

land

and

citymanagement,withlowefficiencyandwithmany repercussions,whichislikewisea

bubble.

Manypeopleareconcernedthatthesebubbleswillburst.Ifthegovernmentusesasuperb

macrocontroltechnique,letstheairoutofthebubbleslittlebylittlewithouttriggeringan

economiccrisisorsocialunrest,andtimelycultivatesneweconomicgrowthandnew

competitiveadvantagessothatbusinessesarerestructuredandupgraded,thiswouldbe

considereda softlanding, andthebubbleswouldnotburst.However,in2013therewillbe

unprecedentedpressure,whichwillwarrantahighdegreeofvigilanceandattention.

TheChallenge

of

the

Changing

Economic

Growth

Engines

After30yearsofsustainedrapidgrowth,Chinaseconomyisfacingchanges,mainlyinfour

areas.First,thetransitionfromrelyingprimarilyonexternaldemandtorelyingondomestic

demand;second,thetransitionfrom aneconomydrivenbyinvestmenttoonerelyingon

consumers;third,thetransitionfromrelyingongovernmentinvestmenttorelyingonprivate

investment;andfourth,thetransitionfromrelyingmainlyontraditionalelementsof

productiontoadvancedelementsofproduction.

Chinamustpromotetherestructuringofitseconomicgrowthenginesinordertomaintainits

growthmomentum.Otherwise,Chinasrateofgrowthmaybedifficulttomaintain.The

problemis

whether

this

transformation

will

be

easy

to

achieve.

It

is

probably

not

so

easy.

JapanandLatinAmericahavegonethroughthistransformation,buttheydidnotdowell

andfellintothe middleincometrap orthe highincometrap.Wealsofacethischallenge.

TheChallengeofAdjustmentstoOurIndustriesandRegionalBusinessesStructures

Changingthestructureoftheeconomyisthemaindirectionintransformingeconomic

development.Itinvolvesanumberoffactors.Themostimportantistochangehowour

industriesandregionalbusinessesarestructured.

Tochangeourindustries,wemustsolvetwoproblems.Wemusteliminateoverproduction

andupgrade

our

industries.

To

shut

down

businesses

that

are

over

productive

involves

changingtheviewsofmanyinterestgroups,noneofwhichwantthesebusinessestobedone

awaywith.Eveniftheymustbeforcedtoclose,[we]mustpreparewellinorderto

compensatethem.Industrialtransformationandupgraderequiretechnology,highly

qualifiedpersonnel,andmodernmanagement.Wecanmaketheleapforwardonlywhenall

theconditionstodosoarepresent.Thisisathrillingjump,andmanycompaniesmaynot

makeit.Sofar,fewregionsandcompanieshavesuccessfullytransformedorupgraded.

Thecentralandwesternregionsaredevelopingrapidly.Theseregionsdependmainlyonthe

advantageofhavingmanyresourcesandonindustriesthatconsumesubstantialenergy.

However,wemustnowincreaseoureffortstoconserveenergy.Thispresentsaproblemfor

thecentral

and

western

regions.

The

central

and

western

regions

hope

the

government

and

theeasternregionswillcompensatethembecausetheymustnowfocusonprotectingthe

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24

environment.Unfortunately,thenationsfiscalrevenueshavedecreasedsubstantiallyand

economicgrowthintheeasternregionshassloweddown,resultinginacorresponding

declineintheabilitytoprovidecompensation.

TheChallengeoftheIncreasingConstraintsofResourcesandtheEnvironment

Greaterpressurehasresultedfromthefactthatthepricesofenergyandrawmaterialshave

increased.Chinaaccountsforbetween70and80%oftheincreasedglobaldemandforcrude

oil.Thisdemandinfluencesthepriceoftheworldsavailableenergyandrawmaterials.

Atthesametime,pressureisgrowingtoprotecttheenvironment.Duetoglobalwarming,

Chinafacesincreasingpressureintheinternationalarenatoreducecarbonemissions.Chinas

2008carbondioxideemissionswerethehighestintheworld.Ifthispatterncontinues,by

2020,Chinawillproducemorethan30percentoftheworldscarbonemissions.Atthattime,

Chinawillfaceunprecedentedinternationalpressure.

TheChallenge

of

the

Increasing

Social

Costs

of

Economic

Development

Inrecentyearswehaveemphasizedeconomicandsocialdevelopmentbecauseeconomic

developmentisnotanendinitself.Rather,meetinghumanneedsisthegoal.However,from

theeconomicpointofview,socialdevelopmentincreasesexpenses.Governmentsandpeople

mustpayfortheseexpensesinordertomakesurethatpensions,healthcare,housing,

education,andothersocialundertakingsarewellcovered.

Formanylocalgovernments,thepressureonspendingcontinuestoincrease.Administrative

expenditures,infrastructurespending,theconstructionofaffordablehousing,socialwelfare

spending,andstabilitymaintenanceexpendituresaremandatoryormustincrease.

Governmentrevenue,

however,

is

declining,

industrial

and

commercial

taxes

are

declining

becausesmallandmediumenterpriseshavelessincome,andgovernmentincomefromland

useisalsodecreasingbecauseoffallinghousingprices.

TheChallengeofaDeterioratingInternationalEnvironmentforEconomicDevelopment

First,theinternationalenvironmentislessinterestedinChinasexports.Themainreasonis

theongoinginternationaleconomiccrisis.

Astheinternationaleconomiccrisiscontinues,theinternationaleconomywillremain

depressedfortwoorthreeyears,havingagreateradverseimpactonourexports.

Second,theinternationalenvironmentforChinasoverseasinvestmentsisdeteriorating....

Othercountriesdonotwelcomeourinvestments,unlikethewaywewelcometheir

investments.Whenwewanttoinvestintheirhightechcompaniesandprojects,theyare

worriedthatwewillstealtheirtechnology.Whenwewanttoinvestintheirresources,they

saywewillcontroltheirresources.Whenwewanttoapplyourexperiencefromthe

constructionofourdomesticdevelopmentzones,theysaywewillcontroltheirland.Inshort,

theyrestrictChinasinvestmentsunderthepretextofnationalsecurityorotherreasons.

Third,theinternationalenvironmentregardingadjustingtheRMBexchangeratehasnotbeen

goodforsometime....So,[Westerncountries]havebeenpushingtoweakenthe

competitivenessof

Chinese

exports

through

RMB

appreciation.

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Meanwhile,theRMBexchangerateisalsodirectlysubjecttochangesintheU.S.dollar:Ifthe

U.S.dollardepreciates,theRMBautomaticallyappreciates.Atthesametime,Chinasoverall

externalenvironmenthasdeteriorated.BecauseChinaistheworldssecondlargesteconomy,

theUnitedStatesplacesmoreemphasisonChinaasitsmaincompetitorandhasshiftedits

strategicfocustotheAsiaPacificregion.

TheChallengeofIncreasedResistancetoReform

First,vestedinterestsresistreform.Inthepastthreedecades,thereformstrategyhasbeen

uneven,leadingtoaseriousimbalanceandalackofcoordinationinpoliticalreform,cultural

reform,socialreform,andeconomicreform.Alongwithrapideconomicdevelopment;the

reformhasalsobroughtawideninggapbetweentherichandthepoor.Thisprocesshasbred

vestedinterests.Vestedinterestgroupshavebenefittedfromthisimbalanceandthelackof

coordinationinthetransition.Thesevestedinterestshavethusbecomeanobstacletothenext

roundofreform.

Second,there

is

resistance

to

reform

due

to

notions.

....

For

example,

many

people

attribute

thewideninggapbetweentherichandpoorandtheincreaseincorruptiontomarket

orientedreform.Aseveryoneknows,marketorientedreformdidnotbringaboutthese

problems.Rather,theywerebroughtaboutbyincompletereformandtheimbalancebetween

politicalreformandeconomicreform.

Endnote:

[1]ShanghaiSecurityNewsOnline, NineChallengesthatChinasEconomyFaces, August8,

2012.

http://news.cnstock.com/hgjj/201208/2192857.htm.