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China to spend $19 bln in second stimulus tranche

China is set to spend $19 billion in the second tranche of its stimulus package to boost demand in the faltering economy, state media reported.

business Updated: Feb 04, 2009 05:50 IST

China is set to spend 130 billion yuan ($19 billion) in the second tranche of its stimulus package to boost demand in the faltering economy, state media reported on Tuesday.

Beijing announced 4 trillion yuan in stimulus spending late last year, allocating 100 billion yuan of that total in the fourth quarter.

The second installment, like the first, is expected to focus on infrastructure investment, which China sees as the surest way to pump up its economy after growth slumped to a seven-year low of 9 percent last year.

The 21st Century Business Herald, citing an unnamed source, gave the following breakdown of how the 130 billion yuan would be spent:

28 billion yuan on affordable housing;

31.5 billion yuan on public infrastructure, such as electricity, water and roads;

17 billion yuan on health and education;

11 billion yuan on environmental protection;

15 billion yuan on economic restructuring (which often refers to upgrading technology and promoting consolidation in industrial sectors);

the remaining 27.5 billion yuan on unspecified major infrastructure projects.

The National Development and Reform Commission, China's top economic planner, will publish the spending details when it announces the second tranche, but confirmed that it would amount to 130 billion yuan, the official Xinhua news agency said.

Beyond the declared stimulus spending, China has cranked open its fiscal taps.

Central and local governments spent a combined 1.66 trillion yuan in December alone, up 30.8 percent on a year earlier and enough to tip the country into a slight deficit in 2008.

Chinese banks, most of which are owned by the state, have also jumped into the fray and are lending freely in support of the government's stimulus programme.

New local-currency lending leapt 900 billion yuan in the first 20 days of January, building on a jump of 772 billion yuan in December, Premier Wen Jiabao told the Financial Times during a visit to London.

First Published: Feb 04, 2009 05:47 IST