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The Governments Reaction To Macroeconomic Situations And Argument Economics Essay

In order to increase GDP, government have taken a series of economic stimulating measure. In November 2008, China launched a massive investment plan of total 4 trillion RMB, which 1.2 trillion RMB can contributed by central government for investment in the next two years, roughly the same amount will also be invested for counterpart fund by the local governments and the rest will be contributed for the banks or private investment. Central government had announced that the plans of rejuvenating 10 key industries and encourage the country’s citizen to develop Small and Medium Enterprises (SMEs). (Tang & Zhang, 2010)

Besides, the central government also have improved its cooperation with commercial banks. The amount of M2 issued by the central bank grew by as high as 28% in the end of July. In the year 2009, the banks had planned to provide new loans of about 5 trillion RMB, but the first six months had saw new loans of 7.3 trillion RMB. These plans improved Chinese economy, for instance, the GDP growth rate hit 7.9% in second quarter of 2009, closely to the goal of 8% of growth rate for the whole year. (Tang & Zhang, 2010)

Besides for the investment purposes, government expenditure also keep on increasing because of many Chinese enterprises come across great challenges and are even forced to go bankrupt. Therefore, the taxes from these enterprises and their employees are bound to decrease. Besides, the policy of massive tax, fee reduction and exemption has been implemented to solve the problems. (Tang & Zhang, 2010) For instance, valued-added tax reform, purchase taxes cut and raising the household income taxes.

In conclusion, 4 trillion yuan of spending by the government and the active fiscal policy as well as loose monetary policy offset the negative impact of the financial crisis, so that China’s economy went well gradually and there was no large-scale of unemployment. (Linyue, Thomas & Nan, 2012) In my opinion, the action of implementing the 4 trillion RMB investment plan is best to increase back the country’s GDP and rebalance the economy. In order to increase the GDP, government should increase aggregate expenditure, which consists of consumption, investment, government expenditure, import and export.

Government’s Reaction to Labour Market and Argument

In order to solve the unemployment rate for new college graduates, government had made effort to help graduates to find jobs. Some of the jobs were created specifically for college graduates in townships and communities organization in urban areas. Incentives were also provided by local government for enterprises who hire the graduates as an employee. The government has also implemented a policy to encourage enterprises to provide internship trainings for those who couldn’t find jobs upon 6 months of graduation. Besides, government also provided allowances for the students to support their daily life. With all those efforts, employment situation for the graduates this year is slightly better than the year before in spite of the negative impacts of the financial crisis in 2009. (Tang & Zhang, 2010)

In addition, in order to solve unemployment for immigrant workers, Chinese government has applied several trade promotion policies such as increase the tax rebates to the export goods, increased the government’s intervention in the foreign exchange market. These actions will prevent RMB’s further appreciation against the US dollar and lowered its environmental and energy-consuming criteria. (Yu, 2010)

In my opinion, the government’s action on solving the unemployment of new graduates is effective. For instance, it can improve the standard of living such as providing allowance to students and their quality by providing internship to them. The action that taken by the immigrant workers is good because besides solving unemployment problem, it also can improve the export of the country. This is good but the recovery of exports is not decided by exporting countries themselves alone.

Government’s Reaction to the Poor and Argument

Chinese government implemented stimulation package after a few months of financial crisis happened. Based on Figure 1, 9% of stimulation package is invested in rural infrastructure. This measure plays an important role to reduce the negative impact of financial crisis. We can see that, this measure had facilitated economic growth and employment opportunities. Therefore, I conclude that this measure is effective to solve the poor incidence. The social security policy implementation of the government is also to help disadvantaged groups.

Figure1. The Structure of China’s Stimulus Package

Note: Based on Table2

image 2.jpg

Government reaction on Rural Poverty

Chinese government established a policy that about countryside minimum standard supporting system, and had covered at least 30 million rural poverty. Government also speeds up the new rural cooperative medical insurance system and had covered at least 800 million rural populations which the percentage is 90%. In order to help unemployed rural migrants can be easily to find job, Chinese government provide free training to them. In my opinion, by this policy, it may take a long time to see the results, so this policy is not so suitable for unemployed rural migrants to spend the economic difficulties during crisis period. Besides, government provides some fund for rural migrants who want to set up small business at home. This policy maybe more effective than giving free training to rural migrants, because they can immediately set up and do the business to make sure their live. (Tang, 2009)

Government reaction on unemployed college graduates

Chinese government encourage companies provide internship or practical training to college graduates, in order to reduce the unemployment rate from rural and urban area, at the same time provide allowance for the graduates. This policy is effective because when the graduates are internship, they need to spend on basic necessities of life, so allowance is important to graduates when during time recession. (Tang, 2009)

Government reaction on urban poor

Government strengthens social security for the urban poverty. Monthly allowance had increased by government for urban poverty and also retirees. In my opinion, this is the most effective measure to help urban poor by giving them more allowance during the period financial crisis. (Tang, 2009)

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