Sunday, November 9, 2008

China to Offer Stimulus Package Worth Over $585 Billion

Even though China has been doing pretty well economically, projections are its growth will slow by about 3 percent over the next year, down to a little over 8 percent.
That has caused China to enter into the stimulus package fad, and has announced it will offer a package worth over $585 billion to generate growth.

With China being especially vulnerable to export demand slowing down, much of the package will focus on huge infrastructure spending in order to shore up domestic growth.

Some of the sectors targeted, which will focus primarily in ten key areas in the country, are transportation, rural infrastructure, low-income housing, electricity and water. Some of the funds will also be used to build up areas ravaged from natural disasters, particularly the May earthquake in the Sichuan province.

Along with the stimulus package, which is scheduled to be spent over a two-year period, China will also loosen up credit and cut "value-added" taxes which should eliminate up to $17.5 billion in costs to industry.

Concerning credit, commercial bank ceilings will be ended in order to stimulate more lending to projects considered vital to the country. Hopes are it will have an impact on small businesses, rural areas, industrial mergers and acquisitions, and innovation in the technical sector.

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