China Unveils $586 Billion Stimulus Plan
Monday, November 10, 2008
SHANGHAI, Nov. 9 -- China on Sunday night announced an aggressive $586 billion economic stimulus package, the largest in the country's history, at a time when it is struggling with increasing social unrest due to factory closings and rising unemployment.
In a wide-ranging plan that economists are comparing to the New Deal, the government said it would ease credit restrictions, expand social welfare services and launch an infrastructure spending program that would include the construction of new railways, roads and airports.
The announcement by China's State Council marks a dramatic about-face for the country, which had insisted for months that it was largely unaffected by the increasing economic chaos in the rest of the world and had remained on the sidelines while other nations constructed elaborate bailout plans.
Governments around the world had been watching to see if China would step in and fire the economic engines needed to stave off a global recession. In Brazil, where finance officials from 20 of the world's largest economies convened Sunday, attendees were hopeful the stimulus plan would provide a much-needed jolt.
"It's a huge package. It will have an influence not only on the world economy in supporting demand, but also a lot of influence on the Chinese economy itself, and I think it is good news for correcting imbalances," Dominique Strauss-Kahn, managing director of the International Monetary Fund, told the Reuters news service in Sao Paulo.
David H. McCormick, U.S. undersecretary for international relations at the Treasury Department, called it a "welcome step."
President Hu Jintao is expected to join other world leaders in Washington on Saturday to discuss joint efforts at preventing a deep and prolonged global recession. China's leaders have been saying for months that the best way China can help is to keep its own economy on track.
The stimulus funds, to be used through 2010, represent roughly 15 percent of China's yearly GDP. China last year accounted for 27 percent of global growth, more than any other nation.
The head of China's central bank, Zhou Xiaochuan, said at the Brazil meeting that by increasing domestic consumption, China could help international markets.
The first clear sign that China might be in trouble along with the rest of the world came last month when the country's statistics bureau said its previously white-hot, double-digit economic growth had slowed to 9 percent in the third quarter, its lowest level in five years.
Several measures in the new stimulus program are aimed at segments of the Chinese population, especially those in the countryside, who are facing economic strain. The government promised to launch new initiatives in affordable housing and health care, and to increase efforts to rebuild earthquake-damaged Sichuan province.
The plan appears designed to address social and political concerns as well as economic ones as the Chinese government faces a wave of marches, sit-ins and general unrest triggered by the deteriorating financial environment. Tens of thousands of laid-off workers have protested in recent weeks, forcing government officials to respond with a mixture of pay-offs and crackdowns on leaders of the movements.