China Announces Stimulus Package To Counteract Effect of Global Financial Crisis
In its biggest move yet to protect its economy from being negatively impacted by the current global financial crisis, China’s authorities have unveiled a $586 billion stimulus package. The money will be invested in developing infrastructure and social welfare by the end of 2010. The package would be focusing on ten areas, including the development of low-cost housing and the expansion of rural infrastructure. Spending will be increased on health, education and environmental protection, as well as creating new roads, airports and railways. Money will also be poured into the rebuilding of disaster areas, such as in the Sichuan Province where, in addition to the enormous loss of life, millions have been left homeless as a result of May’s earthquake.
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.