Bloomberg Video: China unveils $586 Billion stimulus plan as world faces recession;
Consensus for China's 2009 growth is 8% to 9%, Central Bank Governor;
China manufacturing contracted September as crisis cuts exports; Analysis
by Ben Simpfendorfer, RBS Chief China Economist
China's government announced a two-year stimulus exceeding a half-trillion dollar to offset the impact of slowing global growth and unlock the spending power of its vast population.
Premier Wen Jiabao's cabinet set plans for 4 trillion yuan, or $586 billion, in spending and stimulus measures through the end of 2010 aimed specifically to target people's livelihood. The funds, equivalent to almost a fifth of China's $3.3 trillion gross domestic product last year. The measures may stimulate domestic demand, but they won't prevent China's economy from slowing further as the global economy is certainly in a recession.
The stimulus plan may boost China's economic growth by 2 percentage points next year. UBS AG and Credit Suisse AG before today's announcement forecast expansion of no more than 7.5 percent for next year, which would be the slowest in nearly two decades. The policies include a comprehensive reform in value-added taxes, which would cut industry costs by 120 billion yuan. 100 billion yuan of the package is earmarked for this quarter, will go toward low-rent housing, infrastructure in rural areas, as well as roads, railways and airports, the State Council said.
Commercial banks' credit ceilings will be abolished to channel more lending to priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.
Wen is trying to stop China's economic slowdown from deepening as exports wane, manufacturing contracts and a property slump undermines domestic demand. The central bank has already cut interest rates three times in two months, reducing the one-year lending rate to 6.66 percent.
at a brokerage house in Wuhan, Hubei province August 20, 2008.
China's main stock index soared more than 7 percent on Wednesday
because of hopes that the government would introduce
a stimulus package to boost the slowing economy and aid the stock
and property markets. REUTERS/Stringer (CHINA).
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Sources :
- Xinhua: China's 4 trillion yuan stimulus to boost economy, domestic demand , November 9, 2008 19:35
The Wall Street Journal: China Announces $586 Billion Stimulus Package, November 9, 2008, 11:09 A.M. ET
Bloomberg: China Announces 4 Trillion Yuan Economic Stimulus (Update2), November 9, 2008 09:17 EST
Bloomberg Video: Video: China Economic Growth; China Unveils $586 Billion Stimulus Plan; China Manufacturing Contracted September As Crisis Cuts Exports, November 10, 2008 12:01 am EST
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