China Economic Stimulus
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On November 9, 2008 Chinese government announced a stimulus package of 4 trillion yuan, or $585 billion, to tackle challenges posed to its economy by global economic slowdown. China’s government also promised to ensure that this stimulus package is used in a most effective manner over a two-year period. Money would be used to improve important areas like livelihood of people living in rural areas and houses for low-income earners.
Infrastructure projects
On November 9, 2008 Chinese government announced a stimulus package of 4 trillion yuan, or $585 billion, to tackle challenges posed to its economy by global economic slowdown. China’s government also promised to ensure that this stimulus package is used in a most effective manner over a two-year period. Money would be used to improve important areas like livelihood of people living in rural areas and houses for low-income earners.
Infrastructure projects
A large part of Chinese economic stimulus package would be utilized for executing infrastructure and housing projects in China. This package had an immediate impact on low-rent housing projects executed in urban areas. 7.5 billion yuan was added to about 2 billion yuan already alloted for low-rent housing projects in urban areas for October-December 2008. China economic stimulus package also covers railroad, highway, and water conservancy projects.
Distribution of Chinese economic stimulus package
About 280 billion yuan of the China economic stimulus package would be utilized in housing projects for low-income earners. For rural infrastructural projects around 370 billion yuan will be allocated. 40 billion yuan would be spent on healthcare, cultural projects, and education.
About 350 billion yuan would be used up for biological conservation and environmental projects. For post-disaster reconstruction projects, about 1 trillion yuan has been allocated. Another 1.8 billion yuan would be used for construction of railroads, airports, highways, etc. For industrial restructuring and technical innovation, Chinese government has offered about 160 billion yuan.
Will this stimulus package be effective?
For China’s economic stimulus package to be effective, repetitive construction needs to be avoided. Also, wastage of money on environmental devastation and excess of production capabilities should be avoided. Proper management is also necessary to ensure that funds are utilized in a productive manner.
An economist with JP Morgan Hong Kong commented that Beijing is unlikely to use China economic stimulus package for direct bailouts, but may consider making contributions to world organizations like International Monetary Fund.
