Beijing: A $586 billion economy-boosting program is China’s “biggest contribution to the world,” Premier Wen Jiabao said amid hopes that heavy spending on construction and other projects will help support global growth by fueling demand for imported machinery and raw materials.
The huge $586 billion package, announced on Sunday, comes as President Hu Jintao prepared for next weekend’s Washington meeting of leaders of 20 major economies to discuss a response to the global financial crisis.
“China has really set the pace for expansionary policies elsewhere,” Tim Condon, Asia regional economist for the Dutch bank ING, said on Monday.
Wen, the country’s top economic official, said the plan is meant to boost investment and consumer spending, maintain export growth and promote corporate competitiveness and financial reform, state television reported on its national evening news. It said he made the comments at a meeting of government leaders.
The plan calls for higher spending through 2010 on airports, highways and other infrastructure, more aid to the poor and farmers and tax cuts for exporters. That could boost demand for iron ore from Australia and Brazil, factory and construction equipment from the United States and Europe and industrial components from throughout Asia.
“Faster growth in China will be better for its neighbours. For every country in the region, it’s either their top trading partner or is on the way to becoming the top,” Condon said.
The dramatic Chinese plan was motivated by growing government alarm at an unexpectedly sharp downturn in the country’s fast-growing economy that raised the threat of job losses and social unrest.
China’s economic growth slowed to 9% in the last quarter, down from last year’s stunning 11.9 percent growth and its lowest level in five years. Export orders have fallen sharply as global demand weakens, leading to layoffs and factory closures.
Analysts have slashed forecasts of next year’s economic growth but said Monday that with the new stimulus it should be at least 8%.
The new stimulus plan depends heavily on getting China’s companies to invest, economists said.
Beijing might supply as little as one-quarter of the announced spending, or $145 billion, with the rest coming from state companies, bank lending or bond sales by local authorities, said Ting Lu, a Merrill Lynch economist.