China's economy: steady growth should not rely on water release

At present, China's economic growth continues to slow down, corporate profits have dropped significantly, and many people are beginning to worry about a "hard landing" in the Chinese economy. Since May, the government has introduced a series of measures to strive for "steady growth." There is a lot of controversy about the strength, effectiveness and side effects of these measures. Others believe that the government should increase credit support and even liberalize real estate regulation to ensure rapid economic growth. Accelerating major projects and infrastructure construction and relaxing real estate regulation and control in the short term can indeed ensure investment and maintain growth. However, it is impossible to continue to increase investment by the government until the economy can continue to grow steadily in the next year. Accelerating structural reform and economic transformation is the lasting way to “stable growth”. First of all, the current economic downturn has quite a structural and long-term role, and it is not only a temporary lack of demand, but also a short-term stimulus can solve the problem. Although the European debt crisis is expected to improve next year, in the next few years, the European economy will still be affected by deleveraging and fiscal austerity. The US and Japanese economies will not be able to improve significantly. It is impossible for emerging market countries to “decouple” from the developed economies. Therefore, we will face a situation of long-term external demand sluggish. In addition, the weakening of domestic demand is largely due to policy adjustments to reduce real estate bubbles, local debt and financial system risks. We can adjust the intensity and pace of the policy in response to the economic situation, but if the original intention is changed because of the economic slowdown, resulting in repeated policies, the problems and risks of the past will be reappeared and even aggravated. Secondly, the business situation is poor. First, both domestic demand and external demand have weakened. Second, because many industries did not integrate and eliminate excess capacity after the 2008 crisis, but under the stimulus of “4 trillion”, the capacity expanded further. This is because the various costs in the early stage, including raw materials, energy, and wages, have risen rapidly. However, with the economic downturn, the prices of bulk commodities and raw materials have been lowered sharply, wages have also slowed down, and with interest rate cuts to reduce capital costs, corporate financial conditions are expected to improve. More importantly, the current employment situation is still good, and there is no such situation as a large amount of unemployment in early 2009. Therefore, we do not have to be too alarmed by the slowdown in growth, and once again introduce a large-scale stimulus policy. Moreover, after the "4 trillion" stimulus, once again, government investment and credit expansion will be used to maintain growth. The policy space and effects will be limited, and the side effects will become more and more obvious. On the basis of large-scale construction of iron, public and aircraft projects in the past few years, the expansion of infrastructure space is limited and the quality is difficult to guarantee. Moreover, local governments and railway departments have accumulated more debts and relied on land finance. Very serious, and many risks have accumulated in the banking sector, and need to absorb and dispose of bad assets in the next few years. In addition, the government can promote investment in the short-term, although it can support domestic demand and ease the difficulties of enterprises, but it is impossible to replace the problem of insufficient structural demand. On the contrary, it may delay the necessary industry integration of enterprises and even mislead enterprises to further expand production capacity. In order for growth to continue to be stable, we must accelerate the pace of structural reforms in order to explore and initiate new growth points. In this respect, it is far from enough to relax access and call for private capital to enter. It is necessary to further deepen the price reforms of monopoly departments, such as electricity, railway transportation, and refined oil products, simplify administrative examination and approval, and reduce taxes, hydropower in the service industry. Rents and various fees, etc., will enable private enterprises to have the incentive to enter these industries. In addition, the further development of small financial institutions serving small and medium-sized enterprises, tax reduction for small and micro enterprises, including industrial and commercial management taxes and fees, reducing the wages and taxes paid by enterprises, etc., will also help promote employment growth and consumption. In addition, the government has a lot to do with the people's livelihood, but instead of increasing infrastructure investment on a large scale, it provides more public services, increases education and research expenditures, social security and medical insurance expenditures, and increases human and material resources to supervise the improvement of food and medicine. And the safety of the public environment. The ones that can pay for these expenses are not bank loans or land finance, but should increase the dividends of state-owned enterprises, increase environmental pollution taxes and resource taxes, and selectively reduce or withdraw from some industries. The current economic downturn, overcapacity in many industries has once again become more prominent, but the development of the real estate industry has begun to become more rational, and the decline in energy and commodity prices, the sharp fall in inflation has also provided a good opportunity for some price reforms. At this time, if it is too strong to maintain the short-term growth rate, once again investing in investment projects or even abandoning real estate regulation and control, the adjustments in the past year will fall short, and lay a bigger hidden danger for the next year. Only by accelerating reform and promoting transformation can we find new growth drivers and ensure long-term sustainable and stable economic growth. The economic growth momentum after 2013 will depend to some extent on the extent to which structural reforms will advance in the coming year.

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