Chinese economic policies disappointed investors?

The wall street journal reported the economic policies speech made by Chinese Premier Wen Jiabao in Chinese National People’s Congress disappointed both domestic critics and trading partners. In his speech, Wen said the current policies would maintain expanded social programs and jobs as well as $585 billion government-investment plan and aid for major industries. However, the critic argued Chinese government should focus on encouraging consumption by spending more on health care, education and social welfare. Economist said that would cushion the immediate effect of job losses and wage cut.

The criticism was full of the report. It’s obvious the opinion of the media is negative. It called for Chinese government spending more money stimulate the economy, such as buying bad asset from the bank, just as US and UK did at present. The reason causes this bias maybe it is American newspaper. US has got used to rescue plan once they come across economic problems.

For me, I’m supported what China is doing now. The reasons are followed.

Infrastructure is the best way to stimulate the economy
According to Chinese basic condition, using the money into real economy is definitely a right choice. As you know China has lots of labor force, investing the infrastructure can not only stimulate public sector but also down-stream enterprise. And the $585 billion will be used to reduce structural tax burden on companies and householders as well. Though China didn’t stimulate the consumption directly, but all that did it for employment, so that future consumption must be better.

Health care, education and social welfare is not that urgent in China
Many Euro countries call for China improving health care, education and social welfare, which China is doing it all the time. The problem is what’s the degree we need to achieve? Do we need to build the medical market as perfect as Europe? I’m afraid not. European such as UK has already known how heavy the burden is. The perfect social security made government expenditure deficit every year, lots of people prefer talking society allowance rather than work themselves. Considered Chinese population, we can’t take this risk. So the reform is not urgent, we need to find the most suitable way of China.

Bank rescues are not so necessary
China is still a deposit dominate country, compared with US, the mortgage default in China is much lower. China has strict repayment ability examine the people who want to get loan. So maybe the best way for central bank is expanding the loan limit, so that the companies which run well but have problem of capital turnover can get the money.

In sum, according to my analysis, I agree Chinese current economic policy. And I believe Adam Smith's invisable hand, the market will clear itself sooner or later. But if global economy still goes further down, which badly affect Chinese export and investment, I’m afraid China has to turn its main aim to domestic consumption.