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Chinese economic stimulus program

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The stimulus includes plans to rebuild areas damaged by the 2008 earthquakes.[1]

The 2008-2009 Chinese economic stimulus plan is a RMB¥ 4 trillion (US$ 586 billion) stimulus package announced by the central government of the People's Republic of China on 9 November 2008 in its biggest move to stop the global financial crisis from hitting the world's third largest economy.[2][3]

On June 2009, the World Bank raised its growth forecast in China for 2009 from 6.5% to 7.2% amid signs that the economy is doing better than expected, which has been helped by the stimulus package. But it says the country's exports are still down, as the rest of the world struggles with the global recession. It was previously predicted in March 2009 that the Chinese economy would grow by 6.5% in 2009, several percentage points down on 2008's growth.

Announcement

A statement on the government's website said the State Council had approved a plan to invest 4 trillion yuan in infrastructure and social welfare by the end of 2010.[4][3] The stimulus package will be invested in key areas such as housing, rural infrastructure, transportation, health and education, environment, industry, disaster rebuilding, income-building, tax cuts, and finance.[5]

China's export driven economy is starting to feel the impact of the economic slowdown in the United States and Europe, and the government has already cut key interest rates three times in less than two months in a bid to spur economic expansion.

The stimulus package was welcomed by world leaders and analysts as larger than expected and a sign that by boosting its own economy, China is helping to stabilize the global economy. News of the announcement of the stimulus package sent markets up across the world.[6]

Clarified details

As of 15 November, 2008, Beijing standard time, it was revealed that the central government would only provide 1180 billion yuan of funds.[7] Chinese banking officials were reportedly considering establishing a fund worth between 600 billion and 800 billion yuan to purchase domestic shares listed on the Shanghai Stock Exchange, particularly those in the Shanghai Composite, in the event the Shanghai Index fell to 1,500 points.[8].

On March 6, 2009, China's National Development and Reform Commission announced a revision of the stimulus and published a breakdown of how the funds would be distributed.

Public infrastructure development took up the biggest portion -- 1.5-trillion yuan, or nearly 38% of the total package. The projects lined up include railway, road, irrigation, and airport construction.

The second largest allocation - one trillion yuan - went to reconstruction works in regions hit by the 8-magnitude Sichuan earthquake last May; that was followed by funding for social welfare plans, including the construction of low-cost housing, rehabilitation of slumps, and other social safety net projects.

Rural development and technology advancement programs shared the same amount of allocation - at 370 billion yuan each. Rural projects in the pipeline included building public amenities, resettling nomads, supporting agriculture works, and providing safe drinking water.

Technology advancement mainly targeted at upgrading the Chinese industrial sector, gearing towards high-end production to move away from the current export-oriented and labor-intensive mode of growth. This was in line with the government's latest Blueprint for revitalizing 10 selected industries.

To ensure sustainable development, the Chinese government also allocated some 210 billion yuan, or 5.3% of the stimulus package for promoting energy saving and poison gas emission cuts, and environmental engineering projects.

Last but not least, 150 billion yuan was allocated for educational, cultural and family planning purposes. [9]

See also

References

  1. ^ China plans $586 billion economic stimulus from the International Herald Tribune
  2. ^ Bradsher, Keith (2008-09-04). "China’s Central Bank Is Short of Capital - NYTimes.com". Nytimes.com. Retrieved 2008-10-01.
  3. ^ a b Barboza, David (2008-11-10). "China unveils $586 billion stimulus plan". International Herald Tribune. Retrieved 2008-11-10.
  4. ^ Paul Maidment. "China Announces Massive Stimulus Package". Forbes.com. Retrieved 2008-11-11.
  5. ^ "China plans 10 major steps to spark growth as fiscal, monetary policies ease". News.xinhuanet.com. Retrieved 2008-11-14.
  6. ^ "China's $586-billion stimulus plan could boost world economy - Los Angeles Times". Latimes.com. Retrieved 2008-11-14.
  7. ^ "Beijing offers just quarter of stimulus funds - FT.com". FT.com. 2008-11-16. Retrieved 2008-11-16.
  8. ^ "Another China Bailout? 800 Billion Yuan Stabilization Fund Being Reviewed". www.eeo.com.cn. 2008-11-12. Retrieved 2008-11-16.
  9. ^ "http://www.eeo.com.cn/ens/finance_investment/2009/03/07/131626.shtml". www.eeo.com.cn. 2009-03-07. Archived from the original on 2009-05-21. Retrieved 2009-03-10. {{cite web}}: External link in |title= (help); Unknown parameter |deadurl= ignored (|url-status= suggested) (help)

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