I don’t post much about current affairs1 but the current Chinese stimulus package seems worth talking about. To forestall the possibility of an economic downturn, China is planning a Rmb4,000bn ($586bn) stimulus package. This number may be a bit exagerated, but that is still a lot of simoleons. If this does come about it will be a pretty decisive shift in Chinese policy. Partly it will be China really becoming the world financial leader it would like to be. One reason they are announcing it now is to have something to brag about at the upcoming G20 meetings. More importantly, though, it may been seen in the future as a decisive point where China turned to domestic demand to drive its economy. This has been going on for a while, of course, but this seems an important new step. It also seems like a good time to retro-fit a social safety net. The money is supposed to go to “low-income housing, rural infrastructure, roads, airports, water, electricity, the environment and technological innovation” at least some of which seems to indicate that the cash may be used to fix some of the festering problems of rapid growth. Who knows where the money will end up, of course, and there are some bad signs here (like an emphasis on trying to continue the real estate boom). The plan supposedly “offers an opportunity to push forward the long-waited revision of oil and natural gas prices by linking them with global markets.” Raising gas prices would not be very stimulative, but apparently the idea is if Beijing is handing out all this money it would be a good time to quit subsidizing gas prices. Half a trillion dollars is a lot of money, and spending it will give Beijing a good chance to show what sort of economy they want to be running ten years from now and the extent to which they would like that economy to be run from Beijing.
despite what they do to our hit counts ↩