Nov 10 2008
seems like everyone is doing the stimulus package thing
And it also seems like everyone who is trying to implement one is also having a harder time trying to get it off the ground quickly. Hopefully it will at least be done in a “timely manner”… I say this because I’ve been watching the U.S. news and noticed that the bailout package hasn’t been in the news (of course, there were elections), but the news that has trickled out appears to show that the bailout needs more time to take effect than everyone was hoping for.
Well, here comes China with their stimulus package, courtesy of the Wall Street Journal, “ China Sets Big Stimulus Plan In Bid to Jump-Start Growth” ( h/t to China Venture News, that was quick):
China unveiled an economic stimulus program it billed as totaling $586 billion, aiming to bolster domestic demand and help avert a global recession.
Though the two-year package appeared to include some previously announced measures, its size was clearly designed to revive the fading confidence of Chinese businesses and consumers, and impress foreign governments. Asian shares rallied sharply early Monday on the Chinese announcement, with benchmark stock indexes in Tokyo, Hong Kong and Shanghai all jumping close to or above 5% in the early hours of trading.
The announced sum of four trillion yuan represents about 16% of China’s economic output last year, and is roughly equal to the total of all central and local government spending in 2006. New spending of even half that amount would be substantial next to China’s six trillion yuan annual budget for this year.
The plan includes spending in housing, infrastructure, agriculture, health care and social welfare, and features a tax deduction for capital spending by companies.
Although Chinese officials have been meeting daily on the financial crisis, most observers hadn’t expected leaders to reach final consensus on a stimulus plan until an annual economic-policy meeting scheduled for the end of this month. The rapidity of the response underscored the government’s concern about the growing risks of a real downturn.
The rapid response of the government’s concerns are, of course, well placed. As the news media trumps the looming downturn (borderline Great Depression, which I think is slightly extreme), it’s absolutely killed investor confidence. In other words, the self fulfilling prophecy is happening. So China wades into the waters, which is impressive. But stuff like this takes time…
China’s economy won’t be able to absorb so much spending immediately: Economists expect one or two more quarters of slowing growth at a minimum before a rebound could take hold.
Beijing has long held that economic growth of at least 8% is needed to provide the improvement of employment and incomes the ruling Communist Party relies on for popular support. China’s growth has slowed to its weakest pace in five years, with output expanding just 9% in the third quarter from a year earlier after gaining nearly 12% in 2007.
That’s the ultimate kicker though. Change–any sort of change–takes time. Hopefully what China enacts will come in time to help the global economy. Sadly, that may not be the case.
