China has stunned the world with its $586-billion domestic spending plan to boost its economy, announced on Sunday, even as much of the world gropes for funds. Indications are that this would put the country on the path to having a greater say in global financial stability, including enhanced voting power.
Though everyone has been expecting some measure or the other from the country to keep its dream run going, the sheer magnitude of the package is staggering.
“This is the biggest ever stopgap measure in history by the Chinese government,'' said a statement from Frank Gong, chief economist at JP Morgan Securities, Asia Pacific. “The package is way beyond all expectations in the market.''
Terming the global economic crisis a 'new opportunity' for China, Beijing said the move would stimulate domestic demand for 'steady and relatively fast economic growth'.
Chinese Premier Wen Jiabao on Sunday presided over a State Council executive meeting which said that the “with the deepening of the global financial crisis over the past two months, the government must take flexible and prudent macro-economic policies to deal with the complex and changing situation.''
The world is watching this fight back and expects a rescue act, since China sits on nearly two trillion dollars in the world's largest foreign exchange reserves. China has said that maintaining its own stable growth is a contribution to fighting the global crisis.
“China is showing the world that it is really serious in keeping domestic growth strong and that China needs to keep and spend the money at home,'' said Gong. “In our view, China is expected to ask for more power (voting power for example), representation and say in restructuring the global financial system.”
The package includes tax cuts, value-added tax reforms, a loosening of credit conditions and mega spending, and rebuilding the earthquake-battered Sichuan in southwest China.