History by Joseph Stiglitz

The other weekend I attended Three Talk at Three on the Bund with Nobel laureate Joseph Stiglitz. Drawing parallels between past and present was a recurring theme, but what I found interesting was that during the Great Depression, the U.S. federal government introduced stimulus programs that were directly contradicted by tax increases and expenditure cutbacks at the state level.

Private vs. Public

I thought of this when I read a report in The Economic Observer which wrote that the majority of new bank loans and infrastructure projects in China have been handed to state-owned enterprises rather than private companies, which are seen by the banks as riskier candidates. The now-struggling private sector has contributed greatly to the GDP growth and has led job creation these past few decades, and while I’m not an advocate of total privatization, I can’t help but wonder whether state-level protectionism, like trade protectionism, might counter some of the aims of the stimulus package.

Go West

Government officials have openly acknowledged the plight of the private businesses and are discussing ways to reinvigorate the private sector. Meanwhile, foreign businesses may want to start looking west. According to a newsletter from the JLJ Group, China’s less developed central and western provinces and autonomous regions are going the stimulus route, seeking to attract stronger levels of foreign investment by offering tax breaks, low-interest loans and cheap rents.