June 2009
China's stimulus plan gains traction
China’s investment in its own house has climbed 30.5% so far this year over last, as the government pumps money into building railways, oil pipelines, and low-cost housing.
This statistic comes from the government of China, but Western observers and economic experts do not doubt its veracity. Indeed, one Western expert on the Chinese economy predicts gross domestic product growth in the country at near 10% by the end of this year.
Bloomberg reported Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus package is sparking signs of a government-led recovery in the world’s third-biggest economy after exports collapsed.
Government plans to ease capital requirements for borrowing to invest in fixed assets in transportation, property, coal and information technology may spur more private spending.
“Fixed-asset investment is the most important driver for economic growth this year,” said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong. Sun expects gross domestic product to expand more quickly each quarter this year, jumping to a 9.8% gain in the final three months from a year earlier.
New loans in the four months through April topped the government’s targeted minimum of 5 trillion yuan ($752.5 billion) for 2009 as banks supported the stimulus plan, central bank data showed.
“The current rapid investment growth may not sustain in the second half of this year as new projects and bank loans decelerate,” said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong.
China will give 20 billion yuan ($2.94 billion) this year in interest-rate subsidies on bank loans to help steel, petrochemical, and automobile companies upgrade technology, the government said in May.
Pending investments include a plan by China Petroleum & Chemical Corp. and Kuwait’s national oil company to build a $9 billion refining complex in Guangdong province. Volkswagen AG and partner China FAW Group Corp. plan to spend $737 million (550 million) expanding a factory in Chengdu.
China is battling a global recession that has battered exports and dragged economic growth to 6.1% in the first quarter, the slowest pace in almost a decade.
Nicholas Sheble (nsheble@isa.org) writes and edits Government News.
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