Sunday, September 9, 2012

Economy: What The U.S. Could Learn From China

Last Friday the Shanghai Stock Index jumped more than 3%, the biggest stock market rally in almost eight months. The trigger was a bold step by the Chinese government. Bejing announced a huge investment program into the country`s infrastructure (bloomberg):

Bloomberg reported, that the Chinese officials approved plans to build 2,018 kilometers (1,254 miles) of roads. They also also backed  plans for subway projects in 18 cities, nine sewage-treatment plants, five port and warehouse projects, and two waterway upgrades.

I believe these investment plans are highly appropriate and necessary:

- China is still a developing country and has to build up a gigantic infrastructure to support the further growth of her economy.

- The program will pump a lot of money into the Chinese economy and create there a lot of new jobs and income. This should work as a stimulus to revive economic growth which has been slowing down recently.

- These investments should strengthen the domestic  economy and reduce China`s actual over-dependence from exports and foreign markets.

I reckon that the U.S. could learn from China - for similar reasons:

- The infrastructure in the U.S. is a mess. Very often streets, railways, airports, subway systems, steam pipes and bridges are old and rotten. The U.S. infrastructure reminds more of a developing country and doesn`t suit to the alleged leader of the world.

- Bold investments could rekindle the sluggish job market and create a lot of new incomes for many thousands of Americans.

I realize that this would be extremely costly and therefore unpopular. Rising taxes for financing the huge infrastructure program should be taboo, because taxes are barricades for the entrepreneurial initiative.  I would recommend using credits instead of the actual debt problems. F….k the debts!

I reckon that these infrastructure investments will create enough jobs and income in the coming years that they will amortize the costs in a reasonable time and everyone will be better of.

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