CONFUSION

I just have some questions here regarding to the news announcing Chinese government spending 4trillion yuan for the economy stimulus.

It is like a stimulus plan in U.S. but Chinese government focus on the infrastructure and more government bond is going to be issued, also the yield is going to be lower. The central bank bill is less assuming that the trade surplus and CPI would decrease in recent future. From this, the commercial banks have more loanable liquidity. However, if the speed of cash outflow is not as fast as supposed, then more capital would purchase the Chinese treasury bill and financial bonds, whose yield would become lower and price up--the speculative behaviors will occur--that's a problem again.

Furthermore, now if the property prices are under control, no more downward, that's good, but if it continues increasing, that's really bad. Even worst is that the commercial banks have more capital to lend now, does it mean that China compromise to the real estate and inflation again? Chinese government is thinking about the local government bond now, whereas, the credit risk in China is potential and supervisory mechanism is wake, I am really afraid that policy can have positive effect soon.

The loose policy is applied in China now. Another question here is the tight policy (a year ago). From the historical experience, tight policy always causes depression in a country's economy, the property prices were downward, a lot of factories announced bankruptcies, capital market plunged, export dropped and FDI outflowed. So actually should this policy be used? Following the economy cycle, does it imply that even if no tight policy, the economy will always slow down from the peak? If so, the worries about Chinese over-heating economy are not necessary at all? But the pressure on the tight policy to exercise was still there, RMB should appreciate, interest rate should raise and so forth. Even if Chinese government or Chinese central bank dont want to use it, the pressure from political and the global relationship still would push them to tight. The economy policy seems like a part of political policy.

What the stupid Economics.