China has mini-stimulus of about $300 billion which is about 3% of the $10 trillion economy

1. China outlined a package of measures including railway spending and tax relief to support the economy and create jobs after a slowdown endangered Premier Li Keqiang’s target of 7.5 percent growth this year.

It’s a mini-stimulus package designed to stabilize growth,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing. “As the growth rate is decelerating to the lower end of a reasonable range, Premier Li is trying to do something to get growth back on track.”

* small businesses will get bigger tax breaks

Under the previous policy scheduled to end in 2015, small businesses with annual taxable income of less than 60,000 yuan can get a 50 percent tax cut. The State Council said yesterday that small businesses with taxable income of more than 60,000 yuan can also have the tax cut, and the preferential treatment will be extended to the end of 2016.

* social housing will be built to replace shantytowns

“Accelerating shantytown transformation and getting millions of residents into modern buildings” can “forcefully drive investment and promote consumption,” the State Council said. The government has allocated more than 1 trillion yuan ($178 billion) this year to redeveloping shantytowns.

* railway construction will be sped up

The government will sell 150 billion yuan ($24 billion) of bonds this year to help build railways mainly in the less-developed central and western regions. Authorities will also create a development fund of 200 billion yuan to 300 billion yuan a year to increase sources of rail financing.

China plans to build more than 6,600 kilometers (4,100 miles) of new rail lines this year, 1,000 kilometers more than last year. Almost 80 percent of the investments by the central government will be allocated to the central and western region

“These measures clearly show that the pace of policy easing is picking up,” said Zhang, who formerly worked at the International Monetary Fund. The nation is likely to cut banks’ reserve requirements in the second and third quarters, and chances of an interest-rate reduction are rising, Zhang wrote.

Pettis repeats his predictions of a slowdown for China and prescription for reform

By 2015-16 Michael Pettis suspects 3-4% GDP Growth in China will be the “new normal”. Unemployment will be low and household income will be growing at 5% or thereabouts.

Pettis says that the upper limit of China’s growth will average of 3-4% over the 2012-22 period.

A Chinese economist predicted growth would be come in somewhere between 4% and 6% during the 2012-22 period.

China must now boost consumption by transferring wealth from the state sector to the household sector. This is all the Third Plenum reforms do, but it is why the adjustment will be so politically difficult and why there will be so much opposition from the vested interests.

But it is happening. [Pettis] saysinterest rate liberalization is simply one way of reversing the original hidden transfers, and here is another:

After more than a decade of mostly empty talk, China has finally announced a bold move to grant urban hukou status to 100 million people by 2020. The target is a major component of China’s new urbanisation plan, which represents a significant commitment towards achieving genuine urbanisation.

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