China joins other major economies such as the United States, Japan and Germany which have already introduced their own stimulus plans. China’s plan calls for higher spending on roads, airports and other infrastructure, tax deductions for exporters and more aid to the poor and farmers. Spending on health and education will increase, as well as on environmental protection and high technology. China has also recently cut interest rates three times and lifted the limits on how much each Chinese bank can lend.
Premier Wen Jiabao, 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. “We must implement the measures to ensure a fast and stable economic development,” he said at a meeting of government leaders, according to a report read out on the state television. “They are not only the needs of the development of ourselves, but also our biggest contribution to the world.” China’s new era of prosperity has led to an increase in social spending to help the urban poor and the impoverished rural communities.
“I don’t believe a fiscal stimulus alone is enough to keep growth going. I see it as the jump-starting of a car. Corporate investment and bank lending are the fuel that will be necessary to keep it going,” said UBS Securities economist Tao Wang. “With this strong signal that comes from this package that the government will put its own money on the line, that could bring about matching bank lending and promote corporate investment.
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