Will China's Stimulus Work?
Gordon G. Chang, 11.11.08, 12:00 AM EST
A skeptical view.
On Nov. 9, China's State Council announced its long-awaited--and much needed --stimulus package. The body, the central government's cabinet, said it would spend an "estimated" 4 trillion yuan, about $586 billion, over the next two years on 10 major areas, including low-income housing, rural infrastructure and transportation. In addition, Beijing said it will loosen credit and reduce taxation.
Chinese state media called the plan "a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand."
The IMF and the U.S. Treasury immediately praised the Chinese plan even though the State Council provided few details. Kevin Rudd, the Australian prime minister, called it "extraordinary," and in at least one sense he was correct. The stimulus plan triggered a stock surge at home--the Shanghai Composite leaped almost 7.3%--and around the world. Stocks rallied in Asia and Europe as investors believed the program would help prevent a global recession.
Bookmarks