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This post was edited by abramicus at 2015-10-12 11:26|
THIS IS THE FIVE-STEP PLAN TO IMPLEMENT A CHINESE_CONSUMER_DRIVEN_GROWTH_ECONOMY THAT THE PERSISTENT OVERVALUATION OF THE YUAN WILL NEVER BE ABLE TO ACHIEVE.
First of all, all the current economists advising and implementing the current "Consumption Driven, Service Dominated, Capital Account Surplus (Debt Burdened) Economic Model" should be FIRED, or sent back to school.
Second, the Deng Model of Growth by Production should be officially re-affirmed as the solid foundation of China's economic policy.
Third, with production leading consumption AT ALL TIMES, China should continue to generate a surplus over its consumption that China never needs to have any so-called "Capital Account Surplus" which in layman's terms means "foreign-denominated debts". And not only that, China will always be a creditor country to other nations, earning INTEREST payments for the loans it made to other countries, including those that issued the currencies that China is lending out. This is called "CAPITAL ACCOUNT DEFICIT". YES, CHINA SHOULD ALWAYS BE A CAPITAL ACCOUNT DEFICIT COUNTRY BECAUSE IT MEANS CHINA WOULD HAVE NO NET FOREIGN-CURRENCY DENOMINATED LOANS, WILL NOT HAVE TO WORK ITS BACK OFF TO PAY THE INTERESTS ON THESE FOREIGN LOANS, FOREVERMORE.
Fourth, to induce the Chinese public to consume more of local products, which is what true CONSUMPTION-DRIVEN-GROWTH SHOULD MEAN, China should LOWER THE YUAN EXCHANGE RATE TO 6.50 DOWN ALL THE WAY TO 7.00, which will make local products become cheaper than foreign products. Even foreigners will want to buy Chnese products, but that is no longer the goal.
Firth, to avoid exporting all of China's products to the world and leave the Chineses consumer with less to enjoy, China should impose an EXPORT TAX ON ALL PERSONAL CONSUMPTION PRODUCTS MADE FOR EXPORT. Now, with the export tax, nobody can say China is lowering its exchange rate in order to boost its exports unfairly. A ban on exports is nothing new, as many Western countries have bans on export of high tech to China, and even of oil to the rest of the world. A tax on exports, and even a total ban on some exports, is par for the course in modern economies.
CURRENT POLICY MISTAKE: Never allow production to drop below consumption, which is the HERESY INHERENT IN THE CURRENT DRIVE TO OVERVALUE THE YUAN INSTEAD whcih will force down production and manufacturing, since all Chinese products will be overpriced in dollars abroad, and also overpriced in yuans at home. WHAT CHINA NEEDS IS INSTEAD A LOWER EQUILIBRIUM YUAN EXCHANGE RATE OF 6.50 YUAN/DOLLARS THAT WILL STIMULATE AND SUPPORT PRODUCTION, PLUS AN EXPORT TAX ON ITEMS THAT CHINESE CONSUMERS NEED TO UPGRADE THEIR STANDARD OF LIVING.