WANT CHINA TIMES

Chinese investors are holding their collective breaths to see if the banking crisis predicted two years ago by renowned Chinese economist Li Zuojun will come to fruition in the next couple of months. Li, the deputy director at the Development Research Center of China's State Council, penned an article in Sept 2011 predicting that there will be a major banking crisis in July or August this year caused by excessive local government debt or a housing bubble. Born in 1966 in south-central China's Hunan province, Li graduated with a doctorate in economics from Hubei's Huazhong University of Science and Technology in 1992. Mentored by some of the most famous economics professors in China, Li has worked as a researcher and professor, teaching classes at his alma mater Huazhong and the Chinese Academy of Social Sciences, as well as real estate companies, investment banks and property developers across the country. He has been involved in several major domestic and international research projects and published dozens of articles in major national newspapers. He has also been a leader of more than 20 major research reports for the State Council and penned more than 50 internal papers while working in the private sector. Over the years, his writings have won four China Development Research Awards. Li said back in 2011 that property developers were experiencing worsening cash flow problems after their four main sources of funding sales, credit, the capital market and trust financing had all been on the decline or have hit bottlenecks. Despite having made a lot of money from China's housing market in recent years, the developers believed they would not be able to hold on for much longer if conditions did not improve. Housing prices will definitely take a dive, Li said, though it is not clear how far. It is possible that the new Chinese government, led by president Xi Jinping, could maintain tight controls to limit the drop to about 10%-20%, though Li did not rule out the possibility of a US-like collapse where property prices dropped by as much as 50% to nearly 100% in some cases. Li's astounding accuracy in predicting China's economy has led to him earning the nickname "China's most successful doomsayer." GOOGLETRANSLATION ZuoJun:ChinainJulyandAugust2013economiccrisiswillerupt ThisarticlecomesfromFinancialNetwork Rightnextgovernmentleaders,facedwithachoice,achoicetotakeoverfoam,meticulously maintained,nolaterabletomaintain2015,or2016,thenthatisanevenbiggercrisis.The secondoption,donottakethisbubble,thebubblesosoonaftertakingofficetorip;sothatthe economiccrisismaybeinJulyandAugust2013 Zuo Jun, the State Council Development Research Center of Resources and Environmental Policy Research Institute deputy director, washiredasa consultant or a plurality of local government chiefeconomist. Under the tutelage of economist. The following is hisSeptember 27, 2011 should be invited Huazhong University Alumni

Association, ina reportwill be made withinthe 2013 China will be the outbreak of the economic crisis,thereport content. The first big problem the first point the situation; The first big problem of the second point the social crisis; On social issues secondangle; The first big problem isthe third pointthe international economiccrisis, but also continued; The second major problem the international economicoutlook. Thefirst question, what kind of current domesticandinternational situation, how, how evolution? Andfuture situation of how youlook, how evolution? It may be weare concernedabout. The second question, insuch anew situation, our businessand entrepreneurs, as well as each of us how to do? Thefirst big problem the situation. The situation in the future, this situation is really very subtle, I would like tofocus here on the situation and to tell you three questions: the firstquestion, the future we face some relatively large adjustment even crises. The second question is whether the future is how the international economy an evolutionary trend. The third is ourdomestic short term economic trends over how big? Thefirst most around these three issues. The second major problem, businesses and individuals how we do? This relates to choose whatkind of sector investment, including the choice of what kind of investment, there is a comprehensive enterprise how to respond and so on. First talk about the first one big problem the situation. Thefirst situation isa problem in the Twelfth Five Year period, we may have to happen something. Onemight want to happen during the second five possible an economic crisis to occur. It was strange, is not justan economic crisis broke do? Just outbreak of the U.S. subprime mortgage crisis triggered a decline in our exports, economic growth declined. However, we Chinesepeople do not own the outbreak of the economic crisis, our banks do not go bankrupt, we Chinese peoples economic crisis is brewing, and that when it broke? Ithink it wasin2013, andwhy? For everyone to analyze four reasons: Thefirst reason, foreconomic reasons,economic reasonslead to the possibility of the outbreak of the crisisthere are two, oneis thereal estate bubble burst, the other is the local debt crisis. Of course, thesetwo issues are related, I focus from the second angle with everyone talking about the local government s main source of income has two blocks,one is the industrial andcommercial taxes, as well as the mostrecent coming in2012, because many of the small and medium private enterprises is not the economy.Some local governments,industrial andcommercial tax to be reduced accordingly, the second source of income is income fromlandsales. Beginning this

year, many local governments have been large reductions inland, a few years ago, 50% or even3040%. A few years agoall we ask the government to give landdevelopers have recently become popular for some time the governmentasked developers, when you come tobuy my land. Why? Because they are already facing balance ofpayments gap pressure, Beijing land reserve loans a year 250 billion, andthere s interest pressure is very large, light Chaoyang District land bank loan interesta month on more than10 million. If the land can not be sold, then balance in trouble. Therefore, to reduce business taxes, as well as the reduction of land revenue, many local governments under a lot of stress. Spending it, but is increased, two blocks spending a chunk is the usual expenditure from the national level, this is a defense spending increase in troops wageincreases, the South China Sea, the aircraft carrier will need toincrease investment from local governments, , butalso large scale infrastructureto move forward, 36 millionunits of affordable housing construction needs government spending, strengthening the social security spending twofull coverage of the need for government to strengthen water conservancy facilities require government spending, vigorously developstrategic emerging industry needs government spending, at all costs tomaintainsocial stability requires government spending, so the pressureisvery great expense. The other one, not before, nowhave, and that is the arrival of centralizedrepayment, debt service pressure soon. A fewyears ago, four trillioninvestment inthe amountof days of credit, was very handsome, but not come out of the pie, is toalso,from the second half of this year, the arrival of the repayment period begins, Ming after two years to repay a 4.6 trillion. Why the recent YunnanRoad, Shanghai, Changsha City Investment and our highways, etc., began toshow some of the problems, in fact, this is just tip of the iceberg, because the arrival of large scale centralized repayment period and revenue streams asymmetry caused enormous pressure, So over time, to around 2013, some local governments may go bankrupt, of course, there is the army, puta gun to put here, who said the government go bankrupt? Government is not bankrupt. Whose breaking capacity? Breaking the bank s assets, the money from the bank, the bank s money comes from where? From the majority of enterprisesandpeopleare breaking their production.Thisis the fiscal andfinancial systemic risk, this is the first economic reasons, thereasons for the crisis. Before a potential real estate bubble burst crisis because of the time does not expand. The second reason is the reason that the international external reasons, a few years ago our country s rapideconomic development, which has an importantforce, is the large number of international hot money flowing into China, support our economy bubble generation, the hot money is the benefits or reduce the , speculative, that come, say you canwalk away, he is mainly depending on the regionof the return on investmentprofits. Thereason now to stay in China, because the pastfewyears China s economy has maintainedrapid growth, thesespeculative returns still relatively high, but the Chinese economy is going down, China is gradually emerging risks, there are a number of international organizations began rampant short China concept stocks. U.S. economy is slowly recovering, the appreciation of the U.S. dollar is likely tooccur, the UnitedStates also may raiseinterestrates, so these international hot money atsome point there may be a large scale withdrawal. This will causeus Chinese economic bubble burst, itis our response to the Chinesegovernment is not good.

The third reason is political reasons, the Chinese must also have political economy perspective. Why in 2013, becausein2013 the change of government. Before the change of government, the current government s term ofoffice in the last year, the highest guiding ideology is not an accident, maintenance of stability at all costs tomaintain the stabledevelopment of the economy,which is the main thing. Right next government leaders, faced with a choice of two options.Alternatively, the foam followedinthe past, and then meticulously maintained, then he will maintainituntil when?By 2015 at the latest be able to maintain, or 2016, then that time is anevengreater crisis. The crisis of that time who is to blame, who do not know, thisis an option. The secondoption, do not take thisbubble, the bubble so soonafter taking office to rip. Ruined after the first time will bringthe pain, but for a newleader isa good thing, because the responsibilityisvery clear, is not caused by them, is caused by the front. Secondly, in the foam dancing with down toearth feeling is not the same, after the bubble broke up he could down to earth. Furthermore, the new achievements easier to come up,becauseit reduces the starting point,after the bubble burst performance is relatively easy todotogether, or at the starting point is high time togo upwardis very difficult. Ingeneral, the newleadership took office, in front of three months, out of political considerations, should inherit and carry forward is certainly prudent, and in three months, I began to graduallyexposed some of the problems the former term, showinghis new the idea of new initiatives. An enterpriseto adopt a newchairman, are also true. So why say that the economic crisis could be in 2013, most likely inJulyandAugust2013 (the second half). Thefourth reason, short andlongbottom three cycles may be superimposed. Short period is 3 5years, the current cycle of the economy is down, the next twoyears may be to the bottom. The cycle is a period of about nineto ten years, we think 1949, 1957, 1966, 1976, 1989, 1998, every decade or sois generally going to toss, then from 1998 to now has been Thereare more thana decade, andit should come.Originally 08,09 should be to happen, but it was later pushedback because of policy, but it can notbe pushed too far. There is a long period of 60 years, a period of six decades, they have to count the period of the I Ching. So, after 2013, China may wantan economic crisis brokeout, the performance of the economic crisis: some SMEs bankruptcy, some banks go bankrupt, some local governments gobankrupt, this is our next step to facesucha situation. Both before andafter the five second period, there may be a social crisis broke out. Because of the economic crisis, itmay alsolead to social problems, at present, down the accumulationof a variety of social conflicts or outbreaks also stormin. Thefirst big problem on the second point the social crisis I explained from two angles: first a perspective of our society is sick, sick performance was hot. Thefirst heat, the Civil heat. China is the world s hardest test civil servants, university entrance exam, two or three people in the test one, test Ph.D., a twenty individuals canalso testa. But the Chinese civil service exam, thousands of people in the last onebefore the exam. Why dowe Xiaojiannaodai civil service exam? Because the richand powerful civil servants and security, because we Chinese government has

mastered more and morewealth, more and morepower, more and more control of the assets of that landis the Chinesegovernment, a variety of mineral is a government, is the government s right to tax, the power of life or deathis also the government, many important trade monopolyalsoin the hands of the government, the Chinese governmentwas amazing, everyonewanted to be civil servants. Civil service reform in the backward reaction. The second heat, SOE heat, heat the central enterprises, thecountry back. Current central rate of the income year, small and medium private enterprises is the sum of five hundred, China s state owned enterprises by virtue of central enterprisesmonopoly privileges, suchas the monopoly of land resources, the monopoly of creditresources, monopoly pricing, access to excess profits, which reflects our reform in backwards. The third real estate fever. Nation of real estate, a little bit of powerful enterprises are now engaged in real estate, Haier, Hisense, TCL, Youngor , Romon, Erdos all these outstanding private sector companies are engaged in real estate development, corporate real estate in its interior some proportion is 7080% or more, Iasked somedomestic chairmanand general manager, Isaid, why do you engagein real estate development it, you are not doing very good for you Industry? Pretty big do? Then he asked, he said, why I do not engagein real estate development? Ido engage in real estate development is a return of more than several timesIndustries, Iengage my foolish, this is some of the larger companies. Then those SMEs do? Thenhe real estate, he did not directly engage in the development strength, then he industrial hollowing, industry do not do, real estate speculators from Wenzhou, Hangzhou, Scoop, Scoop from Hangzhou to Shanghai, from Shanghai Scoop Beijing, from Beijing ScoopSanya. Then there is the strength of some individuals do, buy a house, a person buy dozens of sets.And then people can not afford housing? Theytalk about the house, justa meeting totalk about the house, as long as people see me, they ask, the teacher, yousay that the price is up or to fall?When up, when down? All the peopleall the real estate. This shows what the problem is?Descriptionsick. Thefourth heat, speculativefever, is nota real estate stocks, stocks that are not real estate speculators, not real estate on speculation of agricultural products ,garlic, ginger yourarmy, beans you play, and now speculationfunds, loansharking, fried in vogue, prevalence of speculation, does thatindicate? Description sick. Thefifth heat, immigrant fever. Whenan officer to the naked officials, entrepreneurs have little strength to immigrants. Thisis China s current social problems authenticity. On social issues second perspective The gapis caused by too large animportant cause of socialinstability, but alsoa lot of people on animportant aspect of social discontent. Widening wealth gap is how the? Thefirst channel, taxation, since the mid 1990s, we have strengthened the governmentregulation of the economy strengthened taxed priority is to protect the

national tax, our government taxes every year to maintain20%30% of the high speed growth, twice three times the GDP growth in the income of urbanand ruralresidents, many of us relish the government took this as anachievementof our GDP may be a bit of water, but the revenues, but real money. This shows what the problemis? Help us fight the government and China Leader to be added to the extent of theseearly tax cuts, the tax revenue gapis not onlya gap at all levels, as well as government and business, the public income gap. Wealthis nowcontrolled by the government too much. A second channel, investment and financing inclined, in this anti crisis process, four trillion investment over the amount of daysof credit, invested whereto go? Mainly for local investment andfinancing platform and large enterprises, the majority of small and mediumenterprisesand private enterprises, the majority of entrepreneurs get proportion is relatively low, it causes a fortune, especially in property and income widening. The third channel, monopolies, monopoly caused by the widening income gap, telecommunications, electricity, petroleum, petrochemical,finance, monopolies monopoly privilege by virtue of excess profits, the income of some monopolyindustries is our general competitive industry revenue of tentimes. Thefourth channel, irrational distribution of land revenue. We have two kinds of land ownership. One is the city state, a rural collectives.Rural collectives, this was constitutional, he is actually a fake, so when the landused for agriculturalproduction purposes, he is the collective, as longas this land to be realized, the establishment of the development, in the process precisely produce large amounts of LAT, but the majority of rural collective farmers receive only 10 20% ,7080%by all levels of government, developers away, so why sucha biggap between urban and rural areas we are, whywe Chinese farmers itis always poorer, farmers inWestern countries as long as there is land, then he must be middle class. Test whether we sincerely solverural issues, the key is that we can not solve two things: first, to not give farmers landownership; second, allowing farmers not establishedFarmers. The former is the largest economic interests of farmers, which is the largest political interests of farmers. But thesetwo, we are afraid of. If we take ownership of land to the farmers, or farmers collective, our government finances on land collapsed, more than half of local government revenue sources gone.Therefore, it causes the urban rural disparity. Thefifth channel, high prices caused by the widening income gap between rich and poor. High prices are a mechanism ofredistribution of income and platforms. Some of our people a lifetime accumulating alot of money and want to improve their housing conditions, high prices of the three generations ofancestors accumulatedmoney swept away, all of a sudden their colors to the middle class, that money gone too? To all levels of government, banks, developers where to go. The sixth channel, China s stock market, according to WuJingliansaid that evenif the casinois not the place. So in the stock market, China stock market whomake money? Asymmetric information toinformation of that party is to make money. Who holds the information? Listed companies, the Commission, the fund company executives. For those who do not havethe information, the majority of retailinvestors

to make money is not normal, do notmake money is normal ,80 90%are losing money. So the stock market is a redistribution of wealthas a platform. Inaddition to the above six o clock, the handsof the people we have money, they put the money in the bank, butinflation so that the money actually depreciate. Excess of inflation is that inflation, then issuing the righthands of theGovernment, to print more money in the process is tolet your hair tickets change process, whichis a re redistribution of wealth. How the widening wealth gap, through these channels to pull him big! Once a young man told me that after the year 2000, Imonth two thousand dollars, 3800 dollarsa month now, and now the 3800 purchasing power of money not as good as the original twothousand dollars, because of inflation. Moreover, in the year 2000, no new three mountains: Buy and medical treatment, schooling.Now three new mountains pressure up, and mademe 3800 dollars disposable declined sharply, so Iask Li, my standard of living is up ordown? He was telling the truth. But this decade, China s economy has maintained rapid and steady development indeed, which is why a lot of people right now are socialdiscontent, some peoplean Internet content not look, only tosee the title of the BS ing, why he was BSing?He has emotions, feeling of social injustice, so why should the outbreak of a social crisis. Economic crisis willlead toa social crisis, then this crisis may also be accompanied with the outbreak of the economic crisis. Economic crisis andsocial crisisdoes not meanlet an, we use historical perspective to see. People have always happens,month alsowanes, cyclical fluctuations in economic development, this is normal, we havegone throughso many years of rapid development, is the restof the time. Is a rainbow after the storm, so to the 2013 outbreak of the economiccrisisis a good thing forus to win the long term growth opportunities.Meanwhile Forced us through this crisis can transitionand reform, so even if the economic crisis have nothing to fear. Thefirst big problem of the thirdpoint, the international economic crisis still ongoing. From the moment the performance of the world economywill be able to seeit, just the beauty of the outbreak of the debt crisis and the outbreak of the debt crisis is just one of the world economic crisis continues episode. U.S. economic presence in three major issues: Thefirst is a debt that he did notwant to fall into too deep in Libya, because no money, leaving Bush to Obama is a fiscal mess, war is the money. Notlong ago, the two parties adopted a decision on raisingthe debt ceiling to 14.3 trillion bill, but the U.S. a year to $ 14.6 trillion GDP,if the value of GDP, more than once, it means that a year after the income of hardenough to repay the interest, this is just debt, the UnitedStates there are many other bonds,suchas corporate bonds,financial bonds, etc., a total of 60 70 trillion, is the sum of the global GDP a year, if the UnitedStates is a normal country, which has long been bankrupt , and the reason is not bankrupt, because he is the overlord of the world, you can use his dollar hegemony exploited peoplesof the world.

America s second problem is that the entity seconomic recovery thanexpected. The third problemis the high unemployment rate, currently 9.1%, still more, the U.S. government cares about employment andunemployment in particular, because they are reallyserving the government. We Chinese government cares about most is GDP and fiscal revenue andland, which is their own achievements and their own income. EU economies, there are also three major issues: Thefirst problemis that we are always talking about the European debt crisis. The second problemis the Euro base currency too, because he monetary unification,but no unified fiscal, the uneven development of various countries, leading to a series of questions. The third problemis the aging population inthe whole of Europe there is the whole welfare society, making the whole society forward vitality and underpowered. And the Japanese economy since the slump inthe nineties, earthquakes, tsunamis plus triple nuclear radiationcrisisit worse, negative economic growth, so the Japanese economy is notoptimisticabout the future. Involvement of developing countriesin the emerging inflation, India s inflation was over 10%, Russia has more than10%, more than6%in Brazil, China than6.5%. This is the moment the worlds major economies, the main condition, from the situation of these economies, we can see that after the economic crisis is not over. Why is not over yet? First, emerging economies overthe past2012 a rapid recovery of bottom bounce, but stimulus stimulus out of the stylus out of the heart beat stronger. As long as booster a withdrawal, the economy willgo down. Followed from the historical experience, a major crisis takes time to come out. U.S. Great Depression of 1929, there are two versions, one in 1929to 1934, a total of five years, the second is 1929to 1941, a total of 12 years; 1970s oil crisis lasted seven years; 80 years ofU.S. savings andloan crisislasted sixyears; 1990sdebt crisis continues in Japan for eight years; late 1990s Asianfinancial crisislastedforfour years, then the crisis compared with the Great Depression, not soserious, compared with other, atleast as much, soexpect 2 3 years in the past, is not so simple. Therefore, the international economic crisis will continue for the international economic crisis continued to give us what? Exports brought great pressure, lack of external demand. Thefirst big problem of the fourth point, international resources and environment crisis. Now international commodity prices in general are high, global warming, natural disasters, the most important are related to China, 1.4 billion people in mass consumption, and consumption affect the environment, our country compared with other industrialized countries, China accounted for led the worlds first carbon dioxide emissions, resource and environmental pressures affecting their own development.

Thefirst big problem of the fifthpoint, American hegemony broughtabout the crisisin the international clash of civilizations. American hegemonybegan10 years ago, when China s international status came in fifth, six, while the United States to suppress China, began tocreate trouble, suchas the South China Sea collision incident, the bombing incident Embassyin Yugoslavia, but bin Ladens appearanceattracted America s attention, so that the UnitedStates concentrate on dealing with Osama bin Laden, Osama bin Laden is now gone, the UnitedStates began to focusagain turned to China, soin recent years around us began to engage inmilitary exercises, war, suchas Iraq, Afghanistan, North Korea, Taiwan problem, the South China Sea, the Diaoyu Islands issue, Vietnam and other issues. United States began to takeadvantage of trade competition,supporta variety of anti China forces, anti dumping Chinese products so comprehensive means to contain China s development. America s core national interestsis to maintain its hegemony,against all opponents. To combat the Soviet Union, the Soviet Union disintegrate, asagainst the euro, the U.S. manufacturing events inKosovo, in order to fight against the Japanese, the signingof the PlazaAccordforced the appreciation of the yen bubble, so that long term sluggish Japanese economy, in order to combat the Asiantigers, Soros making a financial crisis. Now turn to China, China has 1.4 billion population is a big country, a long history of civilization for thousands of years, nearly30 years to maintain 10% of the high growth, economic output has been routed to the second, inaccordance with this trend continues, 10 years 15 years than the UnitedStates, this is definitely the United States can not tolerate. Now tosee whetherChina will have more than the previous compressivecapacity of those countries, andif not, then the outcome is the same. So now China is facing a more sinister international development environment, surroundedby friends less andless, who told you all day topursue GDP, big hatand no cattle?Busyall day toachieve catch up development, turnto overtake,super regulatory developments and other targets under three years, in fact, we ourselves get nothing, others you have to bear with suitable international responsibilities and pressures. The second major problem the international economic outlook. International economic outlook mainemphasis heresix points. This sixpoint two years ago, several seminars I have repeatedly emphasized, and now look back at my predictions are basically correct, including the September 11 attacks on the United States after the outbreak of the economic trend prediction, I would say look at the United States how to deal with the September 11 incident, when the UnitedStates there are two methods available, the first method is magnanimous U.S. authorities, suchas the use of this method todeal with, the U.S. economy will continue toprosper. The second method is the use of massiveretaliation, if this is the case since the U.S. economy willdecline. In fact the U.S. uses massive retaliation to handle the incident, sure enough, the next time the U.S.economy bruised, battered,

indicating that I was forecastis correct. Another one is a four trillion investment policy after the introduction of the forecast, I had said four trillion investment to economic stimulus effect canlast up to a year, in early 2009, when I predicted secondhalf of 2010 China s economy willgodown, whenChina s economy is V plus U shaped, but the second half of 2010 just in aneconomic turning point, the fact that in the third quarter of 2010 China s economy does go down. I say nowis 2013 to the outbreak of the economicand social crisis, we can verify what Isaid right. For the past twoyears, the economic situation in the judgment of the six sentence can alsobe said to be six point where Iinsist. Thefirst point is the international economic crisis will continue. International economy will continueatlow levels for atleast 2 to 3 years, which was twoyears ago that the firstsentence, it seems true, for reasons already explained earlier inthis here. The second point is the international trade, investment and employment situation has improved but is stillnot optimistic. International trade in2009 dropped by 13%, then rebounded in 2010, although a rebound in2011, but did not bounce back to the level before the international trade is now the main problemfacing the international trade protectionism resurgence, and this is the United States and Europe developed capitalist countries engagedin trade protection, to engage with the past, mainly in developing countries, depending on the characteristics of trade protection, previously developedemphasis onfree trade, now is the Chinese emphasis on free trade, which currently kind of trade protectionismsigns of the world economy on China s economic development, especiallythe development of extremely unfavorable. The third point is the U.S. dollaralso depreciatedfrom the mediumand long term. Why dollar devaluation?We can doa simple analysis, the U.S. national debt is currently high, from nowthe UnitedStates following four methods can be used to repay debt: first, the saleof state owned assets todebt; Second, the gradual development of the economy, the development of industry todebt ; the third, by the refinance old debt; fourth, printing money to repay. Then the United States will take to repay the debt it that way? U.S. willuse the firstmethod thatis becoming to buy assets to repay you? Currently the largest U.S. creditor is China, the UnitedStates is unlikely to apply this method to solve the debt problem. The use of second and third methods to repay debt and itlooks too slow too tired. Weighmost likely after the U.S. approach is to print money, because this methodis low cost, high effect. The printing of dollars direct benefits are: First,the directformation of purchasing power,as theworlds currency can be consumed directly. The second isa direct reduction of debt burden, the dollarstarted to depreciate more natural creditors injured. Three is toincrease the competitiveness of U.S. exports. Four is a direct reduction of the fiscal deficit. Five is beneficial tothe Wall Street financial marketactivities, as financial innovation, financial derivatives are inU.S. dollars as a means torelease more money on Wall Street to promote greater prosperity. U.S. dollar now emboldened greatest cloutlies in its possessiona large gold reserves, the worst situation is to abandon the dollar, re create a new world currency, and its virtue, but you can easily get ridof their huge debt, so that the dollar will continue to depreciate next time. Thefourth point is that a new round of globalinflation is inevitable. In fact, inflation has come in emerging countries, the developed countries are alsocoming, the EU has reached 3%, the UnitedStates has more than2%, the future will evolve further,

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the first reason is that countries inorder to stimulate their economies have taken low interest rate policy, the policy of lowering interestrates is double edged sword. On the one hand the lowinterest rates can spur investment and boostthe economy; while the other hand, it will lead to asset bubbles and inflation. The second reason is that governments take in order to maintain a highgrowth policy of printing money, and now in many countries through the issuance of money to maintain the high inflation to stimulate the economy, leading to high prices, creating a bubble economy. Thefifth point is the global industrial structure is accelerating molding. Mainly in three aspects: First, increased the proportion of the real economy, virtual economy declined.Because the virtual economy has triggered the financial crisis, risk, so nowall countries inthe importance of the real economy;Second, the emerging industry in the global economic structure, the proportion will rise. The so called emerging industry refers to new energy, energy saving and environmental protection industries, the current crisis facing the worlds three the energy crisis, environmental crisis,are inseparable from the economic crisis to resolve development of emerging industries; three emerging economic powers in the international community statusincrease the status of Western developed countries will be somewhat weakened. The sixth point is the world s major economies, the fiscal deficitand the debt burden will haunt the future development of the world economy for some time. With the government spending more, less income, which led to national development bonds, if the controllable range, there will be conducive to national development, if it exceeds the scope ofit triggered the debt crisis. It is obvious from these sixinternational judge in 2023 that in the next five in the first medium term economic situation is still notoptimistic. The six big trend will continue to evolve. BING TRANSLATION

LiZuojun:August2013,Chinawillbreakouttheeconomiccrisis ThisarticlecomesfromthefinancialnetworkonJune25,2013
Sept. 17, 2011 titled, Economic Crisis Will Befall China in 2013. The speech was presented at an internal meeting of the Changsha Alumni Organization of Huazhong University of Science and Technology,

Forresourceandenvironmentalpolicy,developmentresearchcenteroftheStateCouncilLi Zuojun,DeputyDirectoroftheInstitute,washiredasconsultantsorbymultiplelocal GovernmentChiefEconomist.FromtheEconomistWuJinglian.FollowinghisSeptember27, 2011,uponinvitationbytheAlumniAssociationoftheUniversityofscienceandtechnology, inaninternalreportmadeby2013,Chinawillreportoftheoutbreakoftheeconomiccrisis. 1thfirstbigproblemsituation; 2ndlargestissuessocialcrisis;

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Thesecondperspectiveonsocialissues; 3rdofthefirstbigproblemtheglobaleconomiccrisiswilllast; SecondbigproblemInternationalEconomicOutlook. Thefirstquestion,whataboutcurrentdomesticandinternationalsituation,howtoevolve? Andthefutureevolutionofthesituation,whattosee,how?Thiscouldbetheissuesarea concern.Thesecondissue,insuchanewsituation,ourbusinessandentrepreneurs,thereis eachoneofustodo? Thefirstbigproblemsituation.Situationinthefuture,thesituationwasverydelicate,I wouldliketofocusonthesituationtotellyouthreeissues:first,wefacedsomebig adjustments,evencrisesinthefuture.Thesecondquestion,iswhatanevolutionarytrendin theinternationaleconomyofthefuture.Third,ourdomesticshortmediumandlongterm economictrendsofwhat?Firstmajorityonthesethreeissues. Secondlargeproblem,businessesandwedo?itcomeskindofsectorinvestment,including investmentinsomekindofway,thereareenterpriseshowtorespondinacomprehensive manner,andsoon. Firstfirstbigproblemsituation. Thefirstissueofthesituation,35issues,wemayhavetohappensomething.Thingsthat mighthappen,35mayoccurduringaneconomiccrisis.Itisstrange,isnotjustafinancial crisiserupted?OutbreakistheUnitedStatessubprimecrisistriggeredadeclineinour exports,declineineconomicgrowth.However,we,Chinesepeopleseconomiccrisishadnot erupted,ourbankshavenotbankrupt,weChineseeconomiccrisisisbrewing,whatabout whentheoutbreak?Ithinkitis2013,andwhy?Analysisforfourreasons: Thefirstreason,economicreasons,economicreasonsraisedthepossibilityoftheoutbreakof thiscrisistherearetwo,oneistherealestatebubbleburst,theotherisalocaldebtcrisis.Of course,thetwoissuesarerelated,Ifocusedfromthesecondanglesaid,therearetwobig sourcesoflocalgovernmentrevenue,areindustrialandcommercialtaxrevenue,inrecent times,aswellasthenextonetotwoyears,becausemanyprivateenterprisesofsmalland hardtimes.Someindustrialandcommercialtaxrevenueoflocalgovernmentstobereduced accordingly,thesecondsourceofrevenueislandsales.Startingfromthisyear,manylocal governmentlandsaleshadbeendecimated,is50%afewyearsago,oreven3040%.Previous yearsareourdevelopersarebeggingtheGovernmentto,waspopularatthetimethe Governmentrecentlyaskedthedeveloper,whenareyougoingtobuyme.Why?Because theyareunderpressuretobalanceofpaymentsgap,Beijingmunicipallandreserveloanof 250billionayear,interestinitisalotofpressure,light,ChaoyangDistrict,morethan10 millionlandbankloaninterestpaymentsamonth.Ifthelandcannotbesold,thebalanceisin trouble.Reductioninindustrialandcommercialtaxrevenue,aswellaslandrevenue reduction,manylocalgovernmentsunderalotofpressure. Expendituresdoes,insteadisincreasedof,twochunksexpenditures,achunksisusuallyof expenditures,fromnationallevel,,isdefenseexpendituresincreased,forcesofwage increased,sea,andcarrierareneedsincreasedinputs,fromlocalgovernmentfor,based constructionalsotomassforwardadvance,36millionsetguaranteesroomconstruction needsGovernmentexpenditures,strengtheningsocialsecuritytwoafullcoverneeds

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Governmentexpenditures,strengtheningwaterfacilitiesconstructionneedsGovernment expenditures,stronglydevelopmentstrategyemergingindustriesneedsGovernment expenditures,Tomaintainsocialstabilityatallcostsneededgovernmentspending,spending agreatdealofpressure.Anotherpiece,notbefore,now,thatwasitsfocusonarrivalofthe repaymentperiod,debtservicepressures.Afewyearsago,4trillioninvestmentvolumeof credit,wasaveryhandsome,butitsnotpieinthesky,are,startingfromthesecondhalfof theyear,repaymentperiodstartedcoming,thenexttwoyearsto4.6trillion.Whyrecently YunnanHighway,andShanghaiofcityvotedandweChangshaofHighwaywait,began displayedoutsomeproblem,actuallythisjusticebergacorner,isbecausemassof concentratedrepaymentperiodcomesandincomeflownotsymmetriccausedofhuge pressure,soastimeofover,to2013beforeandafter,haspartlocalgovernmentmayto bankruptcy,certainly,hasarmy,putbarreltohereaput,whosaidGovernmentbankruptcy? Governmentwillnotgobankrupt.Whobrokeit?BreakingtheBank,moneyfromtheBank, banksarewherethemoneycomesfrom?Fromthemajorityoftheenterprisesandpeople,is theirproduction.Thisisthesystemicfinancialrisk,thisisthefirsteconomicreasons,causeof thecrisis.Apropertybubbleburstbeforepossiblecrisisduetothetimeconstraintsdonot expand. Secondduetoexternalreasonswhyinternational,afewyearsagoourrapideconomic developmentinChina,whichhasamajorpower,wasthatalargenumberofinternationalhot moneyinflowsintoChina,supportingoureconomicbubblehasgeneratedhotmoneyis increasinglylimited,andspeculative,willcome,andsaycango,hemainlydependsonthe returnoninvestmentsinvariousparts.ArenowstayinginChina,becauseChinahas maintainedrapideconomicgrowthinrecentyears,thesespeculativereturnisrelativelyhigh, butdownChinaseconomy,Chinarisksemerging,someinternationalorganizationsbegan aggressiveshortingChinaconceptstocks.UnitedStateseconomyslowlyrecovers,United Statesdollarlikelyappreciation,UnitedStateswouldalsolikelyraiserates,sothese internationalhotmoneyislikelyatsomepointalargewithdrawal.ThisresultsinUSChina economicbubbleburst,thisisbadgovernment. Thirdreasonispoliticalreasons,mustalsohaveavisionofthepoliticaleconomyofChina. Whyis2013,2013theGovernmentGeneral.IntheGovernmentbeforethegeneralelection, withinthetermofthisadministrationinthelastyear,thehighestguidingprinciplejustdont happen,stabilityatallcosts,maintainingthestabledevelopmentoftheeconomy,thatsthe mainthing. OntheleadershipofthenextGovernment,facedwithachoice,either.Oneoption,followed bythelastbubble,meticulouslymaintained,thenhewilldefendwhatwhen?Maintainedby 2015atthelatest,or2016,sothattimeisabiggercrisis.Whohastheresponsibilityofthat timeofcrisis,andwhodontknow,thisisanoption.Thesecondoption,notthebubbles,let thefoambrokeawaysoonafterhetookoffice.Afterthebreak,firstbroughtaperiodof painful,butfornewleadersisagoodthing,becausetheresponsibilityisclear,notcause them,aretheresultofearlier.Secondly,thedanceonthebubblewithdowntoearthitisnot thesame,afterthebubblebrokehimdowntoEarth.Furthermore,thenewrecordeasier, sincebeginningofthereduced,afterthebubbleburstperformanceisrelativelyeasytodo, otherwiseahighatthebeginningtosetthemupisverydifficult.InGeneral,thenew leadershiptookoffice,infrontof35months,outofpoliticalconsiderations,toinheritthe spiritmustbecarefully,andafter35months,itbegantoopenupsomeoftheprevious questions,showingitsnewthinking,newinitiatives.AnenterpriseforanewChairman,also. Sowhyisthattheeconomiccrisismaybein2013,mostlikelyinAugust2013(thesecond half).

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 Thefourthreason,shortlonginthreecyclesofthetroughmaybesuperimposed.Short period35yearcycle,thiscycletheeconomyisdown,tospecifytheyearaftermayhit bottom.Cycleisaround910cycle,wethinkof1949,1957,1966,1976,1989,1998,every decadeorsototossdown,thenfrom1998tothepresentaremorethan10years,shouldhave arrived.0809istohavehappened,butlaterpostponeditbecausepolicy,butcannotpushtoo far.Alsohavingalongcycle,a60yearcycleofthecycle,theycountthebookscycle.So, around2013,thepossibleoutbreakofaneconomiccrisisinChina,theeconomiccrisis:some SMEsbankruptcy,partBank,partofalocalgovernmentbankruptcies,thisisthenextstepwe havetofacesuchasituation. While35issues,couldalsobeasocialcrisis.Sincetheoutbreakoftheeconomiccrisis,may alsoleadtosocialproblems,atpresent,thebuildupistheoutbreakofvarioussocial contradictionsfromintensifyingorLurker. Onthe2ndlargestissuessocialcrisis Isetoutfromtwoperspectives:thefirstpointisthatoursocietyissick,sickishot. Thefirstheat,heatforcivilservants.FreedoisChinascivilserviceintheworld,the Universityentranceexam,entranceexaminationtoatwoorthreepeople,Drexam,oneoutof tenortwentypeoplecanalsogetintoa.ButcivilserviceexamChina,thousandsofpeople cantpasstheprevious.Whysharpenheadthecivilserviceexam?Becausecivilservantsrich righthaspotentialhasguarantees,becauseweChinaGovernmenthasmasterhas increasinglymoreofwealth,andincreasinglymoreofpower,controlhasincreasinglymore ofassets,landisChinaGovernmentof,variousmineralisGovernmentof,taxofrightis Governmentof,wieldabsolutepowerofpowerisGovernmentof,manyimportantof industrymonopolyisinGovernmenthandin,ChineseGovernmenttoocattlehas,everyone arewantedtoDangcivilservants.Thermalresponseofthecivilservicereformastep backwards. Thesecondheat,heat,heatenterprises,StateownedenterprisesGuoJinminback.Currently Centralenterprisesayearincomeisthesumofsmallandmediumenterprisestop500private enterprises,StateownedenterprisesinChinabyvirtueofmonopolyprivileges,land resourcessuchasmonopoly,monopolisticcreditresources,monopolypricing,accessto excessprofits,whichreflectsourreformsastepbackwards. Thethirdheat,hotrealestate.Universalisrealestate,slightlykindofstrengthofenterprise nowaregotrealestate,Haier,andHisense,andTCL,andyaAlGore,,andLuoMongolian, andOrdosalltheseexcellentofprivateeconomicenterpriseareingotrealestate development,someenterpriserealestateinitsinternalofaccountedforthanis7080%above, IaskedhaddomesticofsomeChairmanandGeneralManager,Isaid,youwhytogotreal estatedevelopmentdoes,youindustrialnotdohavequitegoodofdid?Prettybigone?Then heasked,hesaidwhyIdontdorealestatedevelopment?Realestateismybrickandmortar returnseveraltimesover,Idonotfuckmesilly,thisissomeofthelargercompanies.What aboutthesmallandmediumenterprises?Hesreal,hedevelopsnopowerdirectly,sohes industrialhollowing,industrydoesnotdo,friedfriedtoHangzhoufromWenzhou,fried fromHangzhoutoShanghai,FRYfromShanghaitoBeijing,firedfromBeijingtoSanya.And astrongindividual,buyingaHouse,onepersonboughtdozensofcopies.Thepeoplecannot affordtobuyit?TheytalkedabouttheHouse,assoonasyoumeettotalkabouttheHouse,as

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longaspeopleseeme,heasked,teacher,yousaythatthepriceistogoupordown?When up,whenfallen?Everyoneinrealestate.Thatmeanswhatstheproblem?Noteill. Thefourthheat,speculativefever,eitherrealortradingstocks,eitherstockorreal,notreal friedproducts,yougarlic,gingeryou,beansyoulikefirefunds,loanshark,popular speculation,speculationprevalent,whatdoesthatmean?Noteill. Fifthheatofimmigration.Politicianswanttobenaked,entrepreneurshavealittlemore strengthtoimmigrants.ThisistheauthenticityofChinesecontemporarysocialissues. Secondperspectiveonsocialissues Gapistoolargetobeanimportantreasonforcausingsocialinstability,isalsoanimportant aspectofmanypeoplethesociety. Howtowidenthewealthgap? Firstachannel,tax,90generationmediumtermyilai,westrengtheninghasGovernmenton economicofregulationstrengtheninghastax,priorityisguaranteesIRS,weGovernmentof taxannuallykeep20%30%aboveofsuperhighspeedgrowth,twicetimesthreetimestimes YuGDPandurbanandruralresidentsofincomegrowth,wemanyGovernmentonputthis asachievementsrelish,weofGDPmaykindofwater,butrevenuebutreallygoldsilver.That meanswhatstheproblem?OurGovernmentandcompetingreachedbottomlevels,earlyon thetaxcuts,fiscalincomedisparityisnotonlythesectionsofthegapalsowidenedincome gapbetweenGovernmentandbusiness,thepublic.Toomuchgovernmentcontrolofwealth now. Thesecondchannel,slopeoftheinvestmentandfinancing,inthemiddleoftheanticrisis,4 trillionofinvestments,hypervolumeofcredit,investmentandwhere?Mainlytolocal financingplatformsandlargeenterprises,themajorityofsmallandmediumenterprisesand privateenterprises,andlowertheproportionofentrepreneursget,resultinginfurther wideningofthewealth,particularlyinpropertyandincome. Thethirdchannel,monopoly,monopolyofincomedisparity,telecommunications,electric power,petroleum,petrochemical,finance,monopolyprivilegesbyvirtueofmonopoly receivedexcessprofits,monopolyincomeisincomeadozentimesinourcompetitive industry. Afourthchannel,landincomedistributionisnotrational.Wehavetwotypesofland ownership.AcityState,aruralcollective.Ruralcollectivealldoes,thisisConstitution providesof,heactuallyisafakeof,sodanglandasagriculturalproductionusesofwhen,he iscollectivelyowned,aslongasthislandtovariableare,togotdevelopment,inthisprocess inthepreciselyproducedlargeoflandVAT,butgeneralruralfarmerscollectiveonlygot10 20%,7080%islevelsGovernment,anddeveloperstookhas,sowhyweurbanandrural wealthgapsolarge,whyweChinafarmersalwayscomparisonpoordoes,Farmersin Westerncountriesaslongastheland,thathemustbemiddleclass. Testofwhetherwereallysolvetheproblemsofagriculture,thekeyiswecanaddresstwo things:first,togivefarmerslandownershipand,secondly,Yundoesnotallowfarmerstoset upfarmersAssociation.Formerfarmersmaximumeconomicbenefits,whichisthelargest politicalinterestsoffarmers.Butthesetwo,wecant.Ifwegavethelandtothefarmersor

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farmersgroup,ourGovernmentlandfinancecollapsed,morethanhalfoflocalgovernment revenueisgone.Therefore,resultsinurbanruralwealthgap. Thefifthchannel,highpricescausedbythewideningincomegapbetweenrichandpoor. HighHousepricesisoneoftheincomeredistributionmechanismsandplatforms.Wehad somepeoplealifetimetoaccumulatealotofmoney,toimprovehousingconditions,high accumulationofthreegenerationsofancestorsinthepriceofmoneysweptawaybackin shapetogotomiddleclass,wheredoesthemoney?GototheGovernments,banks, developers. Thesixthchannel,Chinasstockmarket,accordingtoWuJingliansaidis,whereeventhe casinosarenotasgoodas.Onthestockmarket,whotheChinesestockmarkettomake money?Informationasymmetriesofinformation,thatpartyismakingmoney Whocontrols information?Listedcompanies,securities,fundcompanyexecutives.Asforthosewhodonot masterthemajorityofindividualinvestorstomakemoneyisnotnormal,notmakingmoney isgood,8090%islosingmoney.Sothestockmarketisalsoaplatformofwealth redistribution. Inadditiontothesesixpoints,weareinthehandsofthepeopleandthemoneythey depositedthemoneyintheBank,butactualinflationsothatthesemoneydevaluation. Inflationisexcesscurrencyinrealterms,thenoteissuingrightsinthehandsofthe Government,howisyourtickettogettheprocessofprintingmoney,itisalsoarealignment ofwealthredistribution.Howtowidenthewealthgap,pullinghimthroughthesechannels! Onetime,ayoungmantoldme,beforeandafter2000,Im$2000amonth,now$3,800a month,nowthepurchasingpowerof$3,800isworsethan2000dollarsbecauseofinflation. Notonlythat,butnonewthreemountainataround2000:buyhard,difficult,gotoschool. Newthreemountainspressrightnowmakesme$3,800disposablefallensharplyasa proportionofthemoney,soasktheteacher,mystandardoflivingisrisingordecreasing?He wastellingthetruth. ButthistenyearsChinaseconomyhasmaintainedfastandstabledevelopment,whichis whyalotofpeoplenowonsocialdiscontentnow,someInternetaccess,withoutreadingthe contents,onlytoseethetitleManiangwhyheManiang?Hewasinamood,socialinjustice, sowhywouldasocialcrisis.Theoutbreakoftheeconomiccrisiswilltriggerasocialcrisis, thecrisisisalsopossiblewiththeoutbreakoftheeconomiccrisiswereaccompaniedby. Economiccrisisandsocialcrisisdoesnotmeanthedayouttogounnoticed,welookto history.Oneunexpectedgoodorbadfortune,MoonMoonhasshine,periodicfluctuationof economicdevelopment,thatsnormal,weareaftersomanyyearsofrapiddevelopment,is therestofthetime.Isarainbowafterthestorm,sountil2013,outbreakofaneconomiccrisis isagoodthing,winningopportunitiesforourlongtermdevelopment.Throughthe restructuringandreformofthecrisishasforcedus,soevenifthecrisisitsnotsobad. 3rdofthefirstissue,theinternationaleconomiccrisiswilllast. Fromthepresentperformanceoftheeconomiesoftheworldwillbeabletosee,justusdebt crisisandEuropeandebtcrisisisjustaninterludeoftheworldeconomiccrisiscontinued. UnitedStateseconomytherearethreemajorissues:

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Firstisheavilyindebted,hewasnotinLibyaintoodeep,becauseofnomoney,Bushleft Obamaafiscalmess,warisformoney.Notlongago,Twopartythroughhasonimprove bondsceilingto14.3trillionofBill,butUnitedStatesayearsofGDPon14.6trilliondollars,if onceoverGDPofvalue,onmeanswithyihouayearshardproceedsofincomealsoenough reimbursementinterest,thisjustbonds,UnitedStatesalsohasothermanydebt,like Enterprisedebt,financialdebtwait,Trojanhas6070trillion,isglobalayearsGDPofsum, UnitedStatesifisgeneralnational,itsearlybankruptcyhas,isnotbankruptcy,becauseheis worldShangofOverlord,canusingheofdollarshegemonyexploitationworldpeople. UnitedStatesofthesecondissue,istherecoveryoftherealeconomythanexpected. Thethirdproblemisthehighrateofunemployment,stillisabove9.1%,UnitedStates Governmentcaresaboutemploymentandunemployment,becausetheyreallyservethe Government.WeChinesecareaboutGDPandlandandrevenue,thatis,hispolitical achievementsandhisincome. EUeconomytherearethreemajorissues: ThefirstquestionthatwealwaystalkabouttheEuropeandebtcrisisnow. Secondissueisthebasecurrencyoftheeuro,becausehehadMonetaryUnion,butno unified,unbalanceddevelopmentinindividualcountries,ledtoaseriesofquestions. ThethirdissueistheentireEuropeanpopulationageingalsobenefitssocietyasawhole, makesthewholelackofvitalityandimpetustosocialprogress.Japaneconomy90justfell apart,earthquakes,tsunamisandthetriplecrisisofnuclearradiationmakesitworse,and economicgrowth,Japanseconomicfutureisnotoptimistic. Emergingdevelopingcountriessufferfrominflation,Indiasinflationhadexceeded10%, Russiamorethan10%,Brazilmorethan6%,morethan6.5%China.Thatisnowtheworlds majoreconomiesmainlyfromtheirsituation,wecanseethat,aftertheeconomiccrisisisnot over.Whynotoveryet?Firstofall,thepasttwoyearsseenrapidreboundattheendofthe recoveryinemergingeconomies,butpolicystimuli,shotout.Assoonasshotout,the economyisdown. Followedbyhistoricalexperience,agreatcomingoutofthecrisisistotime.UnitedStates 1929yearsoflargedepressionhastwospeciessaying,ais,1929to1934,totalfiveyears,IIis 1929to1941,total12years;70generationofoilcrisiscontinuedhas7years;80generationof UnitedStatesstoragecreditcrisiscontinuedhas6years;90generationJapanofbadcrisis continuedhas8years;90generationlateofAsiafinancialcrisiscontinuedhas4years,sothis fieldcrisiswithlargedepressioncomparedtodidntsoserious,withotherofcomparedto,at leastquite,soexpect23yearspast,Notthatsimple.Sotheinternationaleconomiccrisiswill last,theinternationaleconomiccrisiswillbringuswhat?Exportsbroughtabouttremendous pressure,insufficientforeigndemand. 4thsalesfirst,internationalresourcesandenvironmentalcrises. Internationalcommoditypricesoverallarehighernow,globalwarming,naturaldisaster prone,themostimportantarerelevanttoChina,1.4billionpeopleofmassconsumption, consumerimpactontheenvironment,comparedtootherindustrializedcountries,China

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dominated,carbondioxideemissionsintheworldsfirst,pressureonresourcesand environmentaffecttheirowndevelopment. 5thforthefirstissue,ofdancebringsinChinaandtheinternationalcrisisoftheclashof civilizations. SinoUSdance10yearsQianonbegan,thenChinainternationalstatusrowin diwuliuming,andUnitedStatestosuppressedChina,onbeganmanufacturingincidents, asseahitmachineevent,bombingresidentSouthEmbassyevent,butbinLadenofappeared attracthasUnitedStatesofattention,letUnitedStatesconcentratedpoweronfuladeng,now binLadengohas,UnitedStatesbeganputattentionagainsteeringChina,soinrecentyears beganinwearoundgotmilitaryexercises,andlaunchedwar,asIraq,andAfghanistanwar, NorthKoreaproblem,Taiwanproblem,seaproblem,TheDiaoyuIslandissue,VietNam,and soon.UnitedStatesbegantousetrade,supportingantiChinaforces,antidumpingof Chineseproducts,andmorecomprehensivemeanstocontainChinasdevelopment.United Statesnationalcoreinterestsistomaintaintheirhegemony,againstallopponents.Tocombat theSovietUnion,divideanddemoralizetheSovietUnion,againsttheeuro,UnitedStates manufacturingeventsinKosovoforthefightagainstJapan,signedthePlazaaccordforcing theyenbubble,Japanlongtermeconomicdoldrums,tocombatAsiasfourlittledragons, Sorosmadethefinancialcrisis. NowitsuptoChina,andChinaisagreatpower,with1.4billionpeople,hasalonghistoryof thousandsofyearsofcivilization,nearly10%percentformorethan30yearsofhighgrowth, economicoutputhasrankedthesecond,basedonthistrend,10,and15,overUnitedStates, thismustbetheUnitedStatescannottolerate.CanChinanowthanbeforethecountry strongerunderpressure,ifnot,thentheoutcomeisthesame.Chinanowfacesahostile internationalenvironmentfordevelopment,lessandlesspeoplearound,whotoldyouto pursueGDP,animpudentattempttorepresentthedefeatasavictory?Busyalldaytodo catchupwithdevelopmentandcurvepasses,Superregulationobjectivesofdevelopment,a differenceofthreeyears,infact,wedidnthaveanything,someoneisaskingyoutoassume withcorrespondinginternationalresponsibilityandstress. SecondbigproblemInternationalEconomicOutlook. InternationalEconomicOutlookhere,mainemphasisonsixpoints. ThissixapointsintwoyearsQianofnumbertimesseminarintheIrepeatedlytostressed had,nowbackheadseeseeIthenofforecastbasicallyareiscorrectlyof,whichincludingon 911eventoutbreakHouUnitedStateseconomictrendofforecast,IthenonsaidseeUnited Stateshowtoshould911event,thenUnitedStateshastwospeciesmethodcanselected,first speciesmethodisUnitedStatesauthoritiesmagnanimity,asusedthismethodtoshould, UnitedStateseconomicwillwillcontinuestoprosperity.Thesecondmethodistheuseof massiveretaliation,ifthatisthecaseUnitedStateseconomywilldecline.InfactUnitedStates workthroughthemassiveretaliationtothisincident,andsureenough,UnitedStates economyovertherestofscarred,sapped,indicatingthatmypredictionwascorrect.Alsoais on4trillionofinvestmentpolicyintroducedHouofforecast,Ithenonsaid4trillion investmentoneconomicstimulusofeffectupcancontinuedayears,in2009earlyofwhenI forecast2010secondhalfofChinaeconomicwillwilldowngo,thenChinaeconomicisvplus ushaped,but2010secondhalfofjustiseconomicofinflectionpoint,factsprovedin2010 thirdquarterChinaeconomicdoesdowngo.Ishouldsayrightnowiseconomicandsocial crisisin2013,wecanexaminemyright.Forjudgingtheeconomicsituationmorethantwo yearsofsixwordcanbesaidtobesixmainpointshere,andIinsiston.

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 1thinternationaleconomiccrisiswillcontinue.Internationaleconomyremainslow,atleastin 23,itwastwoyearsagothatthefirstsentencenowseemstrue,forreasonsexplainedearlier, Iamnotgoingtosayanymore. 2ndinternationaltradeinvestmentandtheemploymentsituationiseased,thereisstill optimism.Internationaltradein2009declinedhas13%,thenin2010appearedhasrebound, whilein2011alsohasrebound,butalsodidntreplytoreboundQianoflevel,international tradenowfacedofmostmainofproblemisinternationalprotectionismagainrise,andthisis beautyEuropedevelopedcapitalismnationalingottradeprotection,withpasttodeveloping mainlygottradeprotectionoffeaturesdifferent,yiqianisdevelopedstressedfreetrade,now isChinastressedfreetrade,Currentsignsoftradeprotectionismonthedevelopmentofthe worldeconomywerenegativeonChinaseconomicdevelopment. 3rdisthemediumandlongtermfallinthedollar.Whythefallinthedollar?Wecanmakea simpleanalysis,UnitedStatescurrenttreasurieshigh,nowUnitedStatesfollowingfour methodsmaybeusedtopayoffdebt:first,thesaleofStateownedassetsindebt;second,the progressivedevelopmentofeconomicdevelopmentindustrydebt;thethird,takenewdebts andolddebts;IV,printingmoneytopay.Onewaythenutaketopayoffthedebt?United Stateswilladoptthefirstapproachistobuyassetstopayhisdebts?CurrentUnitedStates biggestcreditorsareChina,UnitedStatesisunlikelytoadoptsuchasolutiontothedebt problem.Secondandthirdwaytopayoffdebtandlookedslowandtired.BalanceUnited Statesthemostpossiblewayistoprintmoney,becausetheeffectsofthislowcost,high.Print directlybenefits:oneisdirectlypurchasingpower,asaworldcurrencycandirect consumption.Secondistodirectlyreducethedebtburden,startingfallinthedollar,natural creditorswereinjured.ThreeistheUnitedStatesrisingexportcompetitiveness.Fourisa directreductionofthefiscaldeficit.FiveactiveisbeneficialtoWallStreetfinancialmarkets, financialinnovation,financialderivativesareinUnitedStatesdollarsasameansofissuing morecurrencypromptedtheWallStreetmarketmoreprosperous.UnitedStatesagainstthe dollarnowhavenofearofgreatestenergyislargegoldreservesattheirdisposal,theworst situationistofinallygiveupthedollar,againcreatinganewworldcurrency,butitcaneasily shakeoffitshugedebts,sonexttimewillcontinuetofallinthedollar. 4thisanewroundofglobalinflationisinevitable.Infact,inflationinemergingcountrieshas arrived,comingindevelopedcountries,theEUhasreached3%,UnitedStatesmorethanthe 2%,willfurtherevolveinthefuture,thefirstreasonisthatStatesadoptapolicyoflow interestratestostimulatethedomesticeconomy,policyofloweringinterestratesisadouble edgedsword.Lowinterestratescanspurinvestmentandboosttheeconomyontheone hand,ontheotherhandbutcouldleadtoassetbubblesandinflation.Asecondreasonfor Governmentstoadoptapolicyofprintingmoneyinordertomaintainhighgrowth,butin manycountriesisthroughtheissuingofbanknotestomaintainhighinflationtostimulating theeconomy,leadingtohigherprices,creatingabubble. 5thistheglobalindustrialstructureisbeingaccelerated.Mainlyinthreeaspects:first,real economicweightrise,sharevirtualeconomydeclined.Becausevirtualeconomyraisesriskof financialcrisis,sonowallattentiontothedevelopmentoftherealeconomy;second,theshare ofemergingindustriesintheglobaleconomicstructurewillrise.Thesocallednewindustries meannewenergy,energysavingandenvironmentalprotectionindustries,thethreecurrent globalcrisesresolvetheenergycrisis,theenvironmentalcrisis,theeconomiccrisisis inseparablefromthedevelopmentofemergingindustries;third,theemergingeconomic

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powerrisingstatusintheinternationalcommunity,willdiminishthestatusoftheWestern developedcountries. 6thisfiscaldeficitsanddebtburdensoftheworldsmajoreconomieswillbetroubledfor sometimeinthefuturedevelopmentoftheworldeconomy.Asgovernmentspending,less income,thisleadstonationalbonds,ifwithinthecontrollablerangewillalsobeconduciveto thecountrysdevelopment,ifitisthrownoutofthedebtcrisis. Judgingfromthesixitiseasytoseetheinternationalinthenexttwoorthreeyearsthatis TwelveFivethefirstmediumtermeconomicsituationremainsbleak.Sixlargetrendthat willcontinuetoevolve. Author:LiZuojun(Editor:ChenJun) Keywords:LiZuojun EPOCHTIMESSYNOPSIS AneconomicsresearcherinChinasStateCouncil,theequivalentoftheChineseregimes cabinet,predictsaneconomicmeltdowninthecountrynextyear.Hisremarks,whichwere madealmostayearago,weregivenrenewedattentionrecentlyasChinaseconomyactually beginstoslowdownandhispredictionsstarttolooknotfaroffthemark. LiZuojun,aresearcherwiththeNationalDevelopmentandResearchCenteroftheState Council,deliveredaspeechonSept.17,2011titled,EconomicCrisisWillBefallChinain 2013.ThespeechwaspresentedataninternalmeetingoftheChangshaAlumni OrganizationofHuazhongUniversityofScienceandTechnology,accordingtoDeutsche Welle. RecentlythespeechhasspreadwidelyonChinasInternet. AnAug.23postonWeibo,Chinaslargestsocialmediasite,wasforwardedmorethan9,000 times.Theinformationwasalsowidelyreportedbymainlandmediaportals,includingSohu andSina. Insummary,Linotedthatthebankruptciesofsmallandmediumsizedcompanies,banks, andlocalgovernmentsareallsignsofanationwideeconomiccrisis. Ligavefourreasonsforhisprediction: Economic AburstingrealestatebubbleandtheworseninglocaldebtcrisesaretwocausesLiattributes toapotentialeconomicmeltdown. Hereasonsthattheoveralleconomicdownturnledtofinancialhardshipforsmalland mediumsizedcompanies,whichsubsequentlyresultedinreducedindustrialandcommercial taxrevenues.Localgovernmentssufferedfromreducedrevenuesduetothedepressedreal estateindustry.

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 Nevertheless,localgovernmentsareunderalotofpressuretokeepspendingmoremoneyon itemssuchasnationaldefense,localinfrastructure,housingconstructionandsocialinsurance policies,improvementofhydraulicstructures,and,mostimportantofall,maintainingsocial stability. Atthesametime,maturityoflocaldebtsisaddingfurtherpressureandforcingsomelocal governmentsintobankruptcy.Thiswillinevitablyleadtobanksalsodeclaringbankruptcy, anddebtsbeingpassedontoChinesecitizens.Asaresult,Lipredictsafullblowneconomic crisisisimminent. HotMoney ChinaseconomyisslowingdownwhiletheUnitedStatesisexperiencinganeconomic recovery,thereforelargesumsofinternationalhotmoneywillflowoutofChina.Thisdrain willalsocontributetoaneconomicimplosion,hesays. Political Chinas2013leadershiptransitionbringsnewleaderstothehelmthatmightnotbeso anxioustoaddressChinaseconomicwoes.Lithinkstheywontexposeanyofthepast problemsuntilthreetofivemonthsaftertheytaketheirpositions.So,themostlikely recognitionofaneconomiccollapse,accordingtoLisestimation,isJulyorAugustof2013. Followingtheeconomicbubblebursting,therewillbeasubsequentperiodofsuffering.But forthenewleaders,thisisnothingbad,sincetheyarenottoblameforthesuffering,Lisaid. Furthermore,Withtheeconomicbubblebursting,thenewleadershipcanadoptpractical approaches.Newpoliticalachievementswillbegainedmoreeasily,sincethestarting pointiscomparativelylow. Cycles Thevalleysofshortterm,midterm,andlongtermcyclesconvergein2013,Lisaid. Ashorttermcyclespansthreeorfiveyears.Currently,thiscycleismovingdownwardsand willreachbottomwithinthenexttwoyears,Lisaid. Amidtermcyclespansaboutnineortenyears.AccordingtoLi,midtermcyclesinChina occurredalmosteverytenyears,in1949,1957,1966,1976,1989,and1998.Lisaidithasbeen overadecadesince1998,andthecycleshouldbearoundthecorner.Initially,thiscycle shouldhavearrivedin2008or2009.Economicpoliciesatthattimedelayedthecyclesvalley, butitshouldntbedelayedfortoomuchlonger,hesaid. Thereisalsoalongtermcycle,whichspans60years,Lisaid,givinghisspeechatraditional ChineseinflectionwithareferencetotheIChing,alsoknownastheBookofChanges,a classicChinesetextondivination.FromLisestimationthiscycleisalsoapproaching. Withtheeconomiccrisis,socialproblemswillalsoresult.Thecurrentintensificationofmass incidents,orlarge,oftenviolentprotests,canbeseenasaforewarningoffutureturbulence, hesaid.

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 CHINASCOPEVERSION ChinasEconomyFacesNineMajorChallenges WrittenbyTS,AEF,AT [EditorsNote:LiZuojun,DeputyDirectoroftheInstituteofResourcesandEnvironmental PolicyResearchattheDevelopmentResearchCenteroftheStateCouncil,publishedanarticle discussingthemajorproblemsthattheChineseeconomyfaces.TheDevelopmentResearch CenteroftheStateCouncil(DRC)isaleadingpolicyresearchandconsultinginstitution directlyundertheStateCouncil.AccordingtoLi,thenineproblemsare:decliningeconomic growth,inflation,economicbubbles,thechangingeconomicgrowthengines,adjustmentsin ourindustriesandregionalbusinessstructures,environmentalconstraints,thesocialcostsof development,thedeterioratinginternationalenvironment,andresistancetoreform.The followingareexcerptsfromLisarticle.][1] NowthatthestageofChinas30yearsofrapidgrowthhasendedandtherestructuringand developmentstagehasbegun,theChineseeconomyfacesthefollowingproblemsand challenges. TheChallengefromtheSlowdowninChinasEconomicGrowth First,Chinaseconomicgrowthisslowingdown.Itisafactandatrend.The2012second quarterGDPgrowthratedroppedto7.6percent.Thisisnottemporary,but,rather,itreflects themarketsdirection. Theslowdownineconomicgrowthmeansthatthedemandforproductshassubsided,orders havedeclined,andmarketshaveshrunk.Itmeansthatmanycompaniesmayincurlossesto thepointofbankruptcy,leadingtoareductioninjobs.Animportantreasonwhywepursued rapideconomicgrowthinthepastwastosolvetheunemploymentproblem.AsChinas economicgrowthhassloweddown,thepressureofunemploymenthasincreased.Wemust constantlyadapttotheeconomysslowingdownandactivelyrespondtothechallenge. TheChallengeofLongtermInflation In2011ChinasCPIwasashighas6.5percent.InJune2012itdroppedto2.2%,butmay reboundanytime.Thepasttwoyearssawnegativeinterestrates(ratesthatwerelowerthan inflation).Nowwefinallyhavepositiveinterestrates.Whatweneedtobeconcernedaboutis whetherinflationarypressureisashorttermproblem,anintermediatetermproblem,ora longtermone.Itismostlikelyanintermediatetolongtermproblem.Sowemustincrease ourtoleranceforinflationandourresilience. Whathaslongterminflationbroughtus?Inflationmeansthatthewealthofthepeoplehas shrunk,thattheirstandardoflivinghasdeclined,thatthewealthhastransferredfromone socialclasstoanother,thatthegapbetweenrichandpoorhaswidened,thatthecostsforthe developmentofsomeindustrieshaverisen,andthattheenvironmentforeconomic developmenthasdeteriorated. TheChallengeofAccumulatingEconomicBubbles

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Alongwiththerapideconomicgrowth,economicbubbleshavealsoaccumulated.High housingpricesareonegoodexampleofaneconomicbubble.Highpricedassetsrepresent anotherbubble.Wenolongerengageinmanufacturing.Rather,wehavealldivedintothe financialmarket,whichinandofitselfhascreatedabubble.Manyindustriessufferfrom seriousovercapacity,anotherbubble.Manylocalgovernmentshaveinvestedagreatdealin developmentandspentheavilyonfinancing,directlyengaginginthebusinessoflandand citymanagement,withlowefficiencyandwithmanyrepercussions,whichislikewisea bubble. Manypeopleareconcernedthatthesebubbleswillburst.Ifthegovernmentusesasuperb macrocontroltechnique,letstheairoutofthebubbleslittlebylittlewithouttriggeringan economiccrisisorsocialunrest,andtimelycultivatesneweconomicgrowthandnew competitiveadvantagessothatbusinessesarerestructuredandupgraded,thiswouldbe consideredasoftlanding,andthebubbleswouldnotburst.However,in2013therewillbe unprecedentedpressure,whichwillwarrantahighdegreeofvigilanceandattention. TheChallengeoftheChangingEconomicGrowthEngines After30yearsofsustainedrapidgrowth,Chinaseconomyisfacingchanges,mainlyinfour areas.First,thetransitionfromrelyingprimarilyonexternaldemandtorelyingondomestic demand;second,thetransitionfromaneconomydrivenbyinvestmenttoonerelyingon consumers;third,thetransitionfromrelyingongovernmentinvestmenttorelyingonprivate investment;andfourth,thetransitionfromrelyingmainlyontraditionalelementsof productiontoadvancedelementsofproduction. Chinamustpromotetherestructuringofitseconomicgrowthenginesinordertomaintainits growthmomentum.Otherwise,Chinasrateofgrowthmaybedifficulttomaintain.The problemiswhetherthistransformationwillbeeasytoachieve.Itisprobablynotsoeasy. JapanandLatinAmericahavegonethroughthistransformation,buttheydidnotdowell andfellintothemiddleincometraporthehighincometrap.Wealsofacethischallenge. TheChallengeofAdjustmentstoOurIndustriesandRegionalBusinessesStructures Changingthestructureoftheeconomyisthemaindirectionintransformingeconomic development.Itinvolvesanumberoffactors.Themostimportantistochangehowour industriesandregionalbusinessesarestructured. Tochangeourindustries,wemustsolvetwoproblems.Wemusteliminateoverproduction andupgradeourindustries.Toshutdownbusinessesthatareoverproductiveinvolves changingtheviewsofmanyinterestgroups,noneofwhichwantthesebusinessestobedone awaywith.Eveniftheymustbeforcedtoclose,[we]mustpreparewellinorderto compensatethem.Industrialtransformationandupgraderequiretechnology,highly qualifiedpersonnel,andmodernmanagement.Wecanmaketheleapforwardonlywhenall theconditionstodosoarepresent.Thisisathrillingjump,andmanycompaniesmaynot makeit.Sofar,fewregionsandcompanieshavesuccessfullytransformedorupgraded. Thecentralandwesternregionsaredevelopingrapidly.Theseregionsdependmainlyonthe advantageofhavingmanyresourcesandonindustriesthatconsumesubstantialenergy. However,wemustnowincreaseoureffortstoconserveenergy.Thispresentsaproblemfor thecentralandwesternregions.Thecentralandwesternregionshopethegovernmentand theeasternregionswillcompensatethembecausetheymustnowfocusonprotectingthe

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environment.Unfortunately,thenationsfiscalrevenueshavedecreasedsubstantiallyand economicgrowthintheeasternregionshassloweddown,resultinginacorresponding declineintheabilitytoprovidecompensation. TheChallengeoftheIncreasingConstraintsofResourcesandtheEnvironment Greaterpressurehasresultedfromthefactthatthepricesofenergyandrawmaterialshave increased.Chinaaccountsforbetween70and80%oftheincreasedglobaldemandforcrude oil.Thisdemandinfluencesthepriceoftheworldsavailableenergyandrawmaterials. Atthesametime,pressureisgrowingtoprotecttheenvironment.Duetoglobalwarming, Chinafacesincreasingpressureintheinternationalarenatoreducecarbonemissions.Chinas 2008carbondioxideemissionswerethehighestintheworld.Ifthispatterncontinues,by 2020,Chinawillproducemorethan30percentoftheworldscarbonemissions.Atthattime, Chinawillfaceunprecedentedinternationalpressure. TheChallengeoftheIncreasingSocialCostsofEconomicDevelopment Inrecentyearswehaveemphasizedeconomicandsocialdevelopmentbecauseeconomic developmentisnotanendinitself.Rather,meetinghumanneedsisthegoal.However,from theeconomicpointofview,socialdevelopmentincreasesexpenses.Governmentsandpeople mustpayfortheseexpensesinordertomakesurethatpensions,healthcare,housing, education,andothersocialundertakingsarewellcovered. Formanylocalgovernments,thepressureonspendingcontinuestoincrease.Administrative expenditures,infrastructurespending,theconstructionofaffordablehousing,socialwelfare spending,andstabilitymaintenanceexpendituresaremandatoryormustincrease. Governmentrevenue,however,isdeclining,industrialandcommercialtaxesaredeclining becausesmallandmediumenterpriseshavelessincome,andgovernmentincomefromland useisalsodecreasingbecauseoffallinghousingprices. TheChallengeofaDeterioratingInternationalEnvironmentforEconomicDevelopment First,theinternationalenvironmentislessinterestedinChinasexports.Themainreasonis theongoinginternationaleconomiccrisis. Astheinternationaleconomiccrisiscontinues,theinternationaleconomywillremain depressedfortwoorthreeyears,havingagreateradverseimpactonourexports. Second,theinternationalenvironmentforChinasoverseasinvestmentsisdeteriorating.... Othercountriesdonotwelcomeourinvestments,unlikethewaywewelcometheir investments.Whenwewanttoinvestintheirhightechcompaniesandprojects,theyare worriedthatwewillstealtheirtechnology.Whenwewanttoinvestintheirresources,they saywewillcontroltheirresources.Whenwewanttoapplyourexperiencefromthe constructionofourdomesticdevelopmentzones,theysaywewillcontroltheirland.Inshort, theyrestrictChinasinvestmentsunderthepretextofnationalsecurityorotherreasons. Third,theinternationalenvironmentregardingadjustingtheRMBexchangeratehasnotbeen goodforsometime....So,[Westerncountries]havebeenpushingtoweakenthe competitivenessofChineseexportsthroughRMBappreciation.

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Meanwhile,theRMBexchangerateisalsodirectlysubjecttochangesintheU.S.dollar:Ifthe U.S.dollardepreciates,theRMBautomaticallyappreciates.Atthesametime,Chinasoverall externalenvironmenthasdeteriorated.BecauseChinaistheworldssecondlargesteconomy, theUnitedStatesplacesmoreemphasisonChinaasitsmaincompetitorandhasshiftedits strategicfocustotheAsiaPacificregion. TheChallengeofIncreasedResistancetoReform First,vestedinterestsresistreform.Inthepastthreedecades,thereformstrategyhasbeen uneven,leadingtoaseriousimbalanceandalackofcoordinationinpoliticalreform,cultural reform,socialreform,andeconomicreform.Alongwithrapideconomicdevelopment;the reformhasalsobroughtawideninggapbetweentherichandthepoor.Thisprocesshasbred vestedinterests.Vestedinterestgroupshavebenefittedfromthisimbalanceandthelackof coordinationinthetransition.Thesevestedinterestshavethusbecomeanobstacletothenext roundofreform. Second,thereisresistancetoreformduetonotions.....Forexample,manypeopleattribute thewideninggapbetweentherichandpoorandtheincreaseincorruptiontomarket orientedreform.Aseveryoneknows,marketorientedreformdidnotbringaboutthese problems.Rather,theywerebroughtaboutbyincompletereformandtheimbalancebetween politicalreformandeconomicreform. Endnote: [1]ShanghaiSecurityNewsOnline,NineChallengesthatChinasEconomyFaces,August8, 2012. http://news.cnstock.com/hgjj/201208/2192857.htm.

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