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China mulls 370b stimulus package

by KathyWang/The Standard

Monday, August 25, 2008
China's leaders are carefully considering an economic stimulus package of about 370 billion yuan (HK$420.7 billion), including a 220 billion yuan new expenditure and 150 billion yuan of tax cut plan, that may ease the government's monetary policy by the end of the year, China Business News reported.

"Although the details are yet to be sorted out, there is such a plan, and it has been approved by a central finance planning team," state-run Xinhua News Agency said in a report yesterday.

The expenditure part will include the spending of 45 billion yuan on social welfare, 46 billion yuan on agriculture, 38 billion on education, 35 billion yuan on construction, and 28 billion yuan on import of energy and commodity products.

The package will also propose tax cuts of 150 billion yuan in total, including measures to raise the threshold of personal income tax, export tax rebate, and preferential tax packages for small and medium- sized enterprises.

However, concerns over whether to launch the plan within the year rose because officials aren't certain if the country has planned enough budget for it.

This year's snowstorms in southern China and earthquake in Sichuan have already cost China 35 billion yuan.

In the first half, China generated fiscal income of 3.4 trillion yuan, running a fiscal surplus of 1 trillion yuan.

Last week, JPMorgan released a report saying Chinese authorities were considering an economic stimulus plan of at least 200 billion yuan to 400 billion yuan. The controversial news, although unconfirmed by the authorities, helped boost the A-share index by nearly 8 percent in a single trading day.

p/s photos: Pace Wu Pei Ci


Datuk said…
The latest statistic from China confirmed that in July 2008...the revenue to the central and local governments dropped by nearly 20%.

This has reduce the chance for tax cut as an economy stimulation that could beneficial across all sectors. This prudent policy has to be in place as the revenue reduction cycle is still at the initial stage, very far from the the peak point.

Instead, they have to resort to other type of fiscal stimulus which is less effective for mitigate the negative of impact of economy down turn.

Probably, the outlook would be more visible after the Beijing Games.

We do hoped China will be a powerful force to mitigate the upcoming world depression (much severage than the recession) but not a trigger point for adding weight to the already vulnerable economy condition that hit everyone of us !
Anonymous said…
For sure, in coming months, there will be more natural calamities. So, it is safer to provide adequately for these situation.

However, we need to have a recession to overcome the oversupply situation. All of us do not want to see the severe recession which some quarters term as depression.

Whether fiscal policies are effective, no one have the crystal ball to tell. However, we need to fix the financial structure that trigger the sub-prime and subsequent housing problems.

With the rising Yuan, Chinese exports will be affected. As such, i doubt this measure will be good at this juncture. Choosing an appropriate timing is important as the bullets(financial resources) are limited.

Anonymous said…
the beauty of capitalism is that you just can not escape the economic boom and bust cycle.

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