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China: Economic Stimulus Plan Unveiled

(Dec. 24, 2008) On November 9, 2008, the State Council of China announced a plan to increase domestic demand and stimulate economic growth, by investing an estimated four trillion renminbi (about US$585 billion) in ten areas by the end of 2010, as a response to the global financial crises.

This plan, however, is not comparable to the $700 billion financial rescue package approved by the U.S. Congress. According to the announcement, only RMB100 billion (about US$14.6 billion) was actually scheduled to come from the central government for the last quarter of this year, and another RMB20 billion (about US$2.9 billion) will come from the central government to rebuild communities destroyed by the earthquake in May. It is not clear how much the central government will spend in the rest of the time before 2010. The total $585 billion will be expected to come in part from local governments and societal investment, according to the State Council announcement.

The ten areas for this investment are: (1) low-income housing; (2) rural infrastructure; (3) major infrastructure, including railways, highways, and airports; (4) health, culture, and education; (5) ecological environment; (6) science and technology innovation and industrial structure adjustment; (7) post-earthquake rebuilding; (8) raising the income of urban and rural residents; (9) value-added tax reform and other methods to reduce the burden on enterprises by RMB120 billion (about US$17.6 billion); and (10) improvement of financial systems in support of economic growth. (Premier Wen Jiabao Presides over State Council Executive Meeting, Decides on Ten Measures to Increase Domestic Demand [in Chinese], XINHUANET, Nov. 19, 2008,