The Chinese Government Insures Continual Growth

Jupiter, Fla., (PRWEB) July 3, 2008 -- In this issue of Money and Markets, Tony Sagami takes a closer look at how Beijing will do everything in its power to ensure that China's economy keeps booming. Mr. Sagami also discusses how capitalist greed, when combined with some moves by Beijing, could lead to a frenzy of mergers and acquisitions, along with a major rally in the Chinese markets.

The Chinese government is very fond of using big public works projects to keep the economy up and promoting full employment. Four new government infrastructure projects for the western, undeveloped, rural interior were just recently announced. And since the International Olympic Committee awarded the 2008 Olympic Games to Beijing eight years ago, China has gone on an unprecedented spending spree.

The Chinese government understands how crucial domestic consumption is to the long-term health of its economy. Effective July 1, the minimum monthly salary for government employees will jump from 730 yuan (U.S. $106) to 800 yuan. It works out to a 9.6% increase and, more importantly, even a couple dollars makes a huge difference when starting from such a low wage base. The monthly allowance for families living under the poverty line, the Chinese equivalent of what we call welfare, will climb 60 yuan to 390 yuan, a huge percentage increase and the sharpest in the past nine years.

Mr. Sagami recently explained how the Chinese government is aggressively hiking fuel prices. And while the 17% increase in gas prices will only have a mild effect on the Chinese who ride bikes, buses and subways, it will certainly affect some more than others. That is why the Ministry of Finance isn't taking any chances. The announcement came from Beijing that the government plans to spend 19.8 billion yuan ($2.8 billion) to subsidize groups and sectors that could be adversely affected by rising fuel prices. The most important government action of all was the recent vow from Shang Fulin, the Chairman of the China Securities Regulatory Commission (CSRC), to boost regulation in order to promote a stable and healthy development of capital markets.

The Chinese government has cut the stock trading tax and suggested it may permit margin trading. The biggest stimulus of all is the decision to release more of its state owned shares in China's biggest publicly traded companies, like China Mobile and China Life Insurance. These shares in state controlled industries were not previously traded but amounted to two thirds of companies' existing market capitalization.

"The effect of converting these non-tradable shares into tradable shares (called G-shares) will make it possible for those Chinese corporate giants to use the new shares as currency to fund new mergers and acquisitions," Sagami states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspx?Big-Brother-Stoking-Chinas-Red-Hot-Economy-1922

About Tony Sagami & Money and Markets     

Tony Sagami, a veteran investment advisor and a leading expert on Asian markets, is the owner and founder of Harvest Advisors, an investment research and money management company. Mr. Sagami has been managing money for more than 20 years and is one of the early pioneers in the application of technical and quantitative analysis to mutual funds and stocks. He is a featured contributor to Weiss Research's daily e-letter, Money and Markets and monthly Safe Money Report as well as the editor of Asia Stock Alert.

Prior to establishing his own firm, Mr. Sagami was managing director at W.E. Donoghue & Co, serving additionally as the director of investment. During his successful career, he also held the position of account executive at Merrill Lynch.

Mr. Sagami's views on Asian markets, specifically Chinese investments, have been featured in publications such as The Wall Street Journal, Barron's, Kiplinger's, Smart Money, Business Week, New York Times, Washington Post, Investors Business Daily, Bloomberg, Financial Planning Times, Mutual FundsMagazine, Chicago Tribune, and the LA Times, as well as on CNBC and CNBC Asia.

Mr. Sagami holds a degree in economics from the University of Washington.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

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