China's fiscal stimulus

Dr Keynes's Chinese patient

There may be less to China’s fiscal-stimulus package than meets the eye; but it is still hugely welcome

See article

Readers' comments



Honk honk..... just in case you do not know:"Brand America will regain its shine" or time for the China Brand to shine the debate by Economist.com


Chinese consumption should be increased, the massive amount of consumers with high savings rates should be the number one target for businesses around the globe. China is opening its borders slowly but surely promoting diversification of its domestic markets. In a recession such as this the world should be looking to the strongest savers as the most advantageous market. Chinese savings has been limiting the amount of domestic investment. Now that the exchange rate is moving it is even more reason for global companies begin marketing to the Chinese consumer. China's domestic investment spending will help to kickstart the US and EU out of recession. $1.9 trillion is significantly more than $700 billion.


In China I don't think there is a problem with bridges that no one uses, but bridges that collapse within one year of use. There are numerous projects that gets built, bulldozed, rebuild, etc in China, beneath it is mostly money for corruption, bad planning, good economic numbers, jobs, environmental issues, - and a lot of dirt.


" ... how did Japan accumulated so much debt? ..."

It was the result of mis-designed stimulus packages. After the property market bubble, to stimulate economic activities, Japan built lots bridges that no one use!

China may copy the same mistakes.


Wow, how did Japan accumulated so much debt? Is it the asset bubble of the 90s? Probably a hint on the future of the bailout countries.In the end, someone mentioned about the limit of growth, that is a great point and needs to be examined. All these stimulus, would they really work and translate to growth?Chris_Shanghai,You have a very good point. A lot of existing infrastructure projects have been built without consideration of fiscal responsibility. Though I'd like to add, that infrastructure projects are not supposed to turn profits on their own. And I don't know what sources you have about Guangdong's roads. Unless it is a fairly short and small project, roads in developed regions of Guangdong are usually paid off with just a few years' toll, banks are literally *begging* them to take loans - unless this has all been changed in the last year.


The stimulus plan is sensible enough. China certainly needs additional capacity in railways, roads, electricity supply and most of all social services such as health and education. While facilities in some major cities are good, much of the country really does need a boost in infrastructure. The policy of bringing much of this investment forward to prepare for current and future requirements is sound. Even more sound in times of weakening in other sectors of the economy.

Again, the critical question is just how this will be paid for.

Further bank debt for projects that will not cover even interest payments if the funds are borrowed from banks need direct government subsidies. It makes no sense for China to cripple the long term profitability and, if it all goes wrong, even the viability of its banks by forcing them to lend the money to projects that will not generate sufficient economic returns to cover immediate costs. Direct government investment, combined with smaller loans that can be repaid make much more sense.

The irresponsibility of some government authorities in developing and implementing projects with absolutely zero consideration for financing them and genuinely repaying borrowed funds presents a major economic threat to China. When the bill finally comes in for projects already complete and Chinese banks demand repossession of university campuses, airports, roads and other infrastructure because of non payment of loans, China will face a crisis of its own.

yellow rose

as a Chinese,i really appreciate this points out the heart problems in China.

by the way,the author should not forget(or ignore) the serious corruption in China.and because of that,i worry about the simulus plan.


I can't believe that down as U.S. economy now is,those arrogant American is still blaming China..."meaningless excuse for inaction"???

If the biggest and most lucrative market now on the earth is slowing is growth and its damand starts to shrink,I don't think global economy will find anything encouraging.

China is still a developing country with a 1.3B population.AND you AMERICANs should expect us to do anything more,or you are gonna tell me that you are just daydreaming for a salvation from a country far less rich than you?

It's already so awful and shameful for you people to screw up the global economy and mess up the financial market with sub-prime mortgages granted stupidly.

You know what,it's already a joke for you people to have made George.W.Bush your president for straight 8 years.Please don't make more...


I am always wondering why you guys initiate debates on human rights of China on a simple economic issue. what is the relation between economic stimulus plan and Chinese domestic issues? in china, people almost never comment something irrelevant like guantanamo and iraq war under news about American economy crisis. is this the kind of FAIRNESS and EQUALITY you guys want? have you ever learned how to respect other countries and renounce your own prejudice?


How could the stimulus package mark crucial impact in China when almost all the residents facing the issues of education,retirement,housing?Expanding the internal demand?Just theoretical.

a chinese people

yes, the author is crrect in some issues. But CHina is under a difficult way to boost its domestic market. 30 years ago when CHina first opened up to the worldm the share of labor income in its GDP is about 55% but now is less than 35%. much of the benefit of the economy is earned by the capial investor, among which government owns a numerous number of companies which are often counted as the off budget income that can not checked by the congress. this inclinition of share tends to increase, however, the government can not, and want not to restructure it because it is already a special interest over people.


An excellent article. Overall the China package is savvy. There is a lot of recycling in there (including existing commitments) and broad outlines for new commitments. The author correctly points out there is a lot of infrastructure that is urgently needed across the country, with many regions underserviced. The critical question is the financing.

Huge amounts of existing infrastructure is not paying its way. The Guangdong Govt is spending billions of RMB per year topping up the difference between the toll road levies received and the interest bill on building the roads (how is the principal to be repaid?). I have visited beautiful University campuses recently built with world class facilities that occupy astonishing amounts of land (from which thousands of farming families were relocated). No Govt funds were genuinely forthcoming from either the national or provincial Governments. Govt assistance was limited to leaning on banks to provide loans. The Universities can't cover their operating costs from student fees and regular Govt subsidies, much less repay interest or principal. This is repeated across China and across sectors.

The critical issue in any new round of infrastructure projects is ensuring funds are delivered to actually pay for those projects, a return on investment is either built in, or the project is entirely financed by Govt subsidy. Whatever the case, banks should not again be left holding loans with no reasonable hope of being repaid as occurred with SOEs in the 1980s and 90s.

Zhirong Qin

8% DGP growth is essential for China, in year 2004, there are 2.8 millions student graduated from the colleges, every year there are more and more farmers go to the cities, rather than work in the countryside 'coz of the urbanization. If China cannot keep at least 8% GDP growth, according to the estimation by the authority, many people can not find the jobs, that indicates social unrest. 8% GDP growth can creat jobs, which can meet the need.

Someone said China doesn't want to save the world. Firstly, China has not the strong ability to save the whole world, Secondly, most of China's foreign exchange was used to buy US national debt, so China helped US a lot, indeed.

Chinese leaders said,its “greatest contribution” will be to keep its own economy running smoothly.
I've mentioned there are many foreign companies in China, most of them come from north amercia and west europa, if China can keep or stimulate its economy growth in a level not less than 8%, that indicates the western countries will benifit from the development of China. Imagine how many machines and how much resourece that China will import? Where will China import the equipment and technology?

As to human rights, someone here has clearly explained.
And China has the rights to choose its own path of develoment and China is a power for the stability of the world, in the meantime the world benifits from the development of China.

So called “It was a damp squib. Global financial turmoil should encourage it to produce some fireworks.” is really disgusting.

Lastly, what really scared and not democratic is that some guys here don't know they should respect sovereignty of a country.


I don't see the article pointing its finger at China as the cause of the finanacial crisis. But there is a unwanted tone of cynicism. I guess 1) they want to avoid depicting China as some kind of savior 2) they need to hedge, so it blabber about a bunch of pessimistic speculation which even the article itself admit is hollow (so it's a kind of double hedge) 3) Brits become sourpuss when they see others better off, and never admits when they are wrong, so it became Keynes who saved the day.

Prince Chudi

The Chinese Stimulus Package of Listing Top Ten Priorities is a sign the Wisdom of the Chinese Leaders.

I believe the West has a lot to learn from the chinese particularly the concept of low cost production and general low cost of product mentality used to boost output, increase employment and make goods affordable for the consummers.

The Chinese are masters of wealth redistribution and that is what the West needs now. One man ownership of $25 billion does not do much to boost output, consume more and generate larger multiplier effect but rather if the $25 billion is spread among ten thousand people (at the rate of $2.5 million per person) will definetly lead to higher consumption, demand and increased factory output thereby more employment.

The wealth of the world must be spread around to get the economies moving again. This is the singular cause of the current global financial crisis - need for wealth re-distribution.


I agree with the Author most Partly but for the party which the Author blame that Chinese government publish the solution in the too general way, I think it is mainly because the different culture.

I also hope China's government to say what they really have planed, to do what they really have said and to examine what they really have done.

Zhirong Qin

@Crouching Tiger:
Have you ever heard that China's GDP is world's GNP?
There are many western companies in China, they pay the workers very littel wages, of course, that's one of the reasons they were attracted to invest in China, they use the natural resources of China, i think, that's much more cheaper to buy the resources like iron or coal in China than in US or UK. They exported the high-technique products to the wersten countries, meanwhile Chinese companies exported the clothing and shoes.
The deficit was caused only by China? It depends on how you count it. I can also say China has a deficit to some extent.



Products and events


Take our weekly news quiz to stay on top of the headlines

