China said on Sunday it will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand. This is a shift long advocated by analysts of the Chinese economy and by some within the government. It comes amid indications that economic growth, exports and various industries are slowing. A stimulus package estimated at 4 trillion yuan (about 570 billion U.S. dollars) will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake. The policies include a comprehensive reform in value-added taxes, which would cut industry costs by 120 billion yuan. - XinhuaDavid Seaton's News Links
Asian markets welcomed news of the stimulus plan. The Japanese Nikkei index rose 5.6 percent in trading early Monday. Stocks in Hong Kong and Shanghai rallied strongly, jumping over 5 percent and lifting share prices that have been depressed for much of the year. (...) The stimulus plan, though driven by domestic concerns, represents a fresh commitment by China to keep from adding to the economic and financial woes of the United States and Europe. It is also likely to cheer foreign investors in China’s economy by ensuring that the country remains a source of growth. New York Times
"He is a very smart fighter; when he's fighting he is thinking all the time. But, all the time he was thinking I was hitting him." Jack Dempsey
While Americans and their western allies were all patting themselves on the back for electing Barack Obama, the Chinese actually took a major step to re-float the world economy. In a sense the Chinese are now holding the key to the US economy.
Sun Tzu must be be proud.
What this means is that in less than a week, it will be to China that world leaders will be looking to when they meet in Washington and not toward the USA. Things need to be done quickly and it would be almost impossible for the US to duplicate the Chinese plan. As the the NYT says:
China’s package is not comparable to fiscal stimulus measures that are being discussed in Washington. In China, much of the capital for infrastructure improvements comes not from central and local governments but from state banks and state-owned companies that are encouraged to expand more rapidly. The plan also differs from the $700 billion financial rescue package approved by Congress, which has helped strengthen bank balance sheets but did not directly mandate new lending or support specific investment projects in the United States. China’s overall government spending remains relatively low as a percentage of economic output compared with the United States and Europe. Yet Beijing maintains far more control over investment trends than Washington does, so it has greater flexibility to increase investment to counter a sharp downturn.Maybe it will be the Chinese that bail out GM. DS