1/7
This cam as a surprise to me. Beijing and local governments plan to hire a record number of new bureaucrats this year "as the country seeks to bolster employment to help drive an economic recovery".
caixinglobal.com
This cam as a surprise to me. Beijing and local governments plan to hire a record number of new bureaucrats this year "as the country seeks to bolster employment to help drive an economic recovery".
caixinglobal.com
2/7
Many in China, according to the article, are worried that this is an unsustainable way in which to boost growth, and they are probably right, although perhaps this is no worse a way than building even more unnecessary infrastructure.
Many in China, according to the article, are worried that this is an unsustainable way in which to boost growth, and they are probably right, although perhaps this is no worse a way than building even more unnecessary infrastructure.
3/7
The main argument in favor is that a large increase in the hiring of bureaucrats might at least boost domestic consumption.
But this depends crucially on how the hiring is funded.
The main argument in favor is that a large increase in the hiring of bureaucrats might at least boost domestic consumption.
But this depends crucially on how the hiring is funded.
4/7
If it is funded by cutting back on local services, it merely transfers income from one set of households to another, and will have no net impact on consumption. Ditto if it is funded by increasing direct or indirect fees on local households and businesses.
If it is funded by cutting back on local services, it merely transfers income from one set of households to another, and will have no net impact on consumption. Ditto if it is funded by increasing direct or indirect fees on local households and businesses.
5/7
If it is funded by more local government or national debt, it leaves China with the same problem it is trying to resolve, that of boosting growth without generating a further unsustainable increase in the debt burden.
If it is funded by more local government or national debt, it leaves China with the same problem it is trying to resolve, that of boosting growth without generating a further unsustainable increase in the debt burden.
6/7
Ultimately we always come back to the same solution, which is to fund the new spending with the liquidation of local-government-owned assets. It is only by transferring income from local governments to households that China can sustainably rebalance.
Ultimately we always come back to the same solution, which is to fund the new spending with the liquidation of local-government-owned assets. It is only by transferring income from local governments to households that China can sustainably rebalance.
7/7
So far however there is no evidence that this process is underway. Beijing can find new ways to spend money to boost growth in the short term, but it is the way that spending is financed that will ultimately determine whether this growth can be sustained over the longer term.
So far however there is no evidence that this process is underway. Beijing can find new ways to spend money to boost growth in the short term, but it is the way that spending is financed that will ultimately determine whether this growth can be sustained over the longer term.
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