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Government unveils $580 billion stimulus plan

Text by AFP

Latest update : 2008-11-10

The Chinese cabinet approved a proposal to invest 4 trillion yuan ($586 billion) through 2010 to help boost domestic demand, the Xinhua news agency said on Sunday.

 
China on Sunday unveiled an economic stimulus plan and said it would adopt a more aggressive fiscal approach in a major policy shift amid a worrying slowdown in economic growth.
  
The measures were approved at a cabinet meeting chaired by Premier Wen Jiabao on Wednesday, state media said, and would hike spending for agriculture, infrastructure and other sectors to ward off the global financial crisis.
  
"China has decided to adopt an active fiscal policy and moderately easy monetary policies to foster fast but steady economic growth by expanding domestic demand," Xinhua news agency said.
  
The spending package would total four trillion yuan (586 billion dollars) by the end of 2010, including monies already earmarked this year, Xinhua news agency said.
  
State media reports on the measures said they were aimed at spurring domestic consumption. They come amid slackening overseas demand for China's economically vital manufactured goods.
  
"Although we face many difficulties, domestic spending power remains strong," state-run CCTV quoted the meeting as saying.
  
The move is the latest in a series of steps taken by China in recent months to lessen the impact of the global financial crisis amid slowing growth at home.
  
China's economic growth eased to nine percent in the third quarter of this year, the lowest in around five years, partly due to slowing exports.
  
The central bank has also cut interest rates three times since September, twice lowered the ratio of money commercial banks have to keep in reserve and removed loan caps to encourage investment.
  
Those steps marked an about-face from a policy of raising rates and other steps aimed at cooling the economy amid growing inflation and fears of overheating.
  
As part of its efforts to boost domestic demand, the State Council, or cabinet, also recently approved a plan to spend two trillion yuan on construction of new railways from now until 2020.
  
The new approach mirrors similar policies taken between 1998 and 2004 to cope with the effects of the 1997-98 Asian financial crisis.
  
Those measures included issuing large amounts of treasury bonds and ramping up public investment.
  
The new spending will be directed at a broad range of areas including construction of railroads, highways and airports, boosting the services sector, and upgrading power grids, CCTV said.
  
Money also would be poured into social welfare systems including education and public health, it said.
  
However, the reports gave no breakdown on how much would be spent in each area.
  

Date created : 2008-11-09

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