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China Okays $586 Billion Stimulus to Boost Economy

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November 09, 2008 – Comments (4)

[Seriously, WTF is going on in the world today?!?]

China okays $586 billion stimulus to boost economy

Published: Sunday, November 09, 2008

BEIJING (Reuters) - China's cabinet has approved a massive stimulus package worth 4 trillion yuan ($586 billion) through 2010 to boost domestic demand, the official Xinhua news agency said on Sunday.

Investments will be targeted at infrastructure, social welfare and other key sectors as part of an "active" fiscal policy, Xinhua said.

It did not say how the extra spending would be financed.

China ran a consolidated budget surplus in the first half of the year of more than $170 billion, but tax revenue growth is slowing sharply as the economy reels under the impact of the global credit crunch.

The cabinet also announced an explicit shift in monetary policy, which it now described as "moderately easy."

The People's Bank of China has already cut interest rates three times since mid-September and scrapped lending quotas in a bid to support the economy.

Lending to small and medium enterprises will be increased as part of the plan, Xinhua said.

Officials have been flagging measures to pump up demand since gross domestic product growth slowed unexpectedly sharply to 9.0 percent in the third quarter from 10.4 percent in the first half.

Indicators for October have been even weaker.

Giving details of the package, Xinhua said China would invest an additional 100 billion yuan in national construction this quarter and would earmark an extra 20 billion yuan next year for reconstruction in areas hit by major natural disasters.

Sector that will benefit from the extra spending include affordable housing, rural infrastructure, transport networks, environmental protection and technical innovation, Xinhua said.

The cabinet also confirmed a long-awaited reform to the way value added tax is calculated. The result will be to reduce companies' tax bill by 120 billion yuan a year, the agency added.

4 Comments – Post Your Own

#1) On November 09, 2008 at 1:14 PM, milpo (85.10) wrote:

I wonder if they consulted Bernanke and Paulson about this decision.  The Chinese dragon has just injected a ton of coal into its fire breathing furnace. The next step will be to marginalize the U.S. dollar. I fear that an Asian alliance is developing and the eurodollar will become a trinket or a historic curiosity. Thanks for the timely post. The power is shifting and it is heading EAST,

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#2) On November 09, 2008 at 1:31 PM, jgseattle (32.79) wrote:

The key in this article is they do not know how they will finance it.

If they sell some the their foreign reserves look out dollar.

This also mean that the US goverments financing of $1 Trillion over the next year or so is going to cost more. 

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#3) On November 09, 2008 at 1:52 PM, dangerfairy (< 20) wrote:

This is bad.

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#4) On November 09, 2008 at 2:23 PM, MarketBottom (29.44) wrote:

Short Summary

Derivatives have produced financial warfare

Greenspan both an arrogant fool and liar

Bernanke not much better

Global coordinated collapse is happening

Earthquakes Olympics and 1.2 trillion of us mortgage debt doomed China

US consumer was dead years ago

US has lied about consumer price index since 1993, and it was intentionally done

Broke consumers cannot buy inflated assets without the benefit of real wage increases

Domestic chaos assured, world war a possibility

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