The Chinese economic stimulus package

China on Sunday announced a huge economic stimulus package aimed at bolstering its weakening economy and perhaps helping fight the effects of a global economic slowdown.  In a sweeping move at a time when major projects are being put off
around the world, Beijing said it would spend an estimated $586 billion
by 2010 on wide array of national infrastructure and social welfare
projects, including constructing new railways, subways, airports and
rebuilding communities devastated by an earthquake in southwest China
in May.

Here is the story.  Most of this money they would have spent anyway, so what is the net change in the stimulus?  And over how many years is this sum spent?  I think of this as mostly a public relations move.  China wants to tell other countries it is doing lots and it wants to tell its own citizens that it feels their pain and is pro-active.

Is there a gentle way to glide down from 10 to 5 percent growth?  I tend to doubt it.  Are you prepared for a China with negative economic growth for a few years (or more)?  I tend to doubt that too.

Matt Yglesias has interesting commentary; I guess now we’ll see how much an economic surplus is worth when the core macro problem is something other than lack of aggregate nominal demand.

Addendum: Here is further comment.


Comments for this post are closed