China Announces Stimulus Package To Counteract Effect of Global Financial Crisis
China’s economy is primarily driven by exports and is starting to feel the effects of the weakening European and United States economies. Authorities have already cut interest rates three times in two months in an effort to encourage economic expansion. Third quarter statistics disclosed that economic growth has slowed to 9 percent, being the lowest level experienced in five years. While other countries may consider a 9 percent growth an achievement, China is considered to be an emerging economy and needs to create job for literally millions of workers entering the economy each year. Additionally, China’s population has come to expect steadily rising incomes and an improved standard of living.
China’s exports have been growing at a rate of more than 20 percent annually, but analysts believe that the growth rate may fall to as low as zero in coming months as global demand for China’s exports weakens. Credit limits for China’s commercial banks will be done away with in order to channel more lending to rural development and priority projects. The International Monetary Fund (IMF) has been urging governments to develop economic stimulus packages and cut interest rates even further if necessary in order to counteract the economic slowdown. The United States, Japan and Germany have already introduced financial stimulus plans.
Chinese President, Hu Jintao, is expected to join finance officials from the G-20 group of wealthy and developing nations as they convene in Washington on Wednesday to discuss a workable strategy aimed at strengthening the global economy.