China Sets Big Stimulus Plan In Bid to Jump-Start Growth
BEIJING -- China unveiled an economic stimulus program it billed as totaling $586 billion, aiming to bolster domestic demand and help avert a global recession.
Though the two-year package appeared to include some previously announced measures, its size was clearly designed to revive the fading confidence of Chinese businesses and consumers, and impress foreign governments. Asian shares rallied sharply early Monday on the Chinese announcement, with benchmark stock indexes in Tokyo, Hong Kong and Shanghai all jumping close to or above 5% in the early hours of trading.
The announced sum of four trillion yuan represents about 16% of China's economic output last year, and is roughly equal to the total of all central and local government spending in 2006. New spending of even half that amount would be substantial next to China's six trillion yuan annual budget for this year.
The plan includes spending in housing, infrastructure, agriculture, health care and social welfare, and features a tax deduction for capital spending by companies.
China's economy won't be able to absorb so much spending immediately: Economists expect one or two more quarters of slowing growth at a minimum before a rebound could take hold.
Beijing has long held that economic growth of at least 8% is needed to provide the improvement of employment and incomes the ruling Communist Party relies on for popular support. China's growth has slowed to its weakest pace in five years, with output expanding just 9% in the third quarter from a year earlier after gaining nearly 12% in 2007.
That is still fast by the standards of any other country and helps show why China is important to maintaining a decent pace of global economic expansion.
With Sunday's announcement, China will enter a meeting Saturday of the Group of 20 largest economies with a plan that would dwarf stimulus measures by others in the group, which is convening in Washington to discuss ways to stem a global slowdown in growth.
The U.S. pushed through a $168 billion stimulus package earlier this year, equal to about 1% of gross domestic product, and the Federal Reserve has aggressively cut interest rates, complementing the Treasury's $700 billion for troubled financial institutions. Japan has a $51.5 billion package that largely consists of payouts to families and tax relief for businesses, and Germany is moving on tax breaks and loans that will cost the government around $29.9 billion over four years.
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