Yesterday, China announced a 4 trillion yuan (about $570 billion) stimulus package to be implemented over the next two years to “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.” In its announcement, China’s State Council explained that “higher investment must be able to facilitate economic restructuring, promote growth potential by channeling investment to where it's most needed and spur private consumption. Although the economy has maintained double-digit growth for years, fixed-asset investment and exports have dwarfed consumption as the two pillars of expansion. With global recession clearly in view, China must sustain itself by exploiting the domestic market to offset weaker demand abroad.”
Today, following an executive meeting of the State Council, China made a second announcement detailing a ten-step plan to enhance domestic consumption and growth under the stimulus package. The steps include:
- Housing: Building more affordable and low-rent housing and speeding the clearing of slums.
- Rural infrastructure: Speeding up rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure drinking water safety.
- Transportation: Accelerating the expansion of the transport network.
- Health and education: Beefing up the health and medical service by improving the grass roots medical system.
- Environment: Improving environmental protection by enhancing the construction of sewage and rubbish treatment facilities and preventing water pollution in key areas. Increasing support for energy conservation and pollution-control projects.
- Industry: Enhancing innovation and industrial restructuring and supporting the development of the high-tech and service industries.
- Disaster rebuilding: Speeding reconstruction in the areas hit by the May 12 earthquake.
- Incomes: Raising average incomes in rural and urban areas.
- Taxes: Extending reforms in value-added tax rules to all industries.
- Finance: Enhancing financial support to maintain economic growth. Removing loan quotas on commercial lenders. Appropriately increasing bank credit for priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.
A representative from China will attend the Group of 20 meeting in Washington this week.