The Black China Blog

Here is an article which appeared in yesterday’s China Daily.

Only about 60% of the 4 trillion in the package is listed here, but we know that additional money is going towards propping up the price of grain.

This article also gives us an insight into exactly how big the package is. Compared to 2007 at 13 trillion, 2008 will close out at 16 trillion and 2009 at 18 trillion. This suggests to me that in fact much of the 4 trillion is expenditure which was already announced, perhaps with some programs receiving a boost or an accelerated time frame.

But this also supports our argument that China’s economy is still primarily supported by investments, not by exports. Falling export figures are of course a problem for employment and confidence, but in macro terms the economy is likely to continue to grow as the investments in the stimulus package start to create more jobs.

Here is the article. I have inserted approximate USD values.

Minister of National Development and Reform Commission (NDRC) Zhang Ping has made public the breakdown of China’s four-trillion-yuan stimulus plan, which will cover livelihood improvements, R&D, environmental protection and other sectors.

· 280 billion yuan for housing projects (US$40bn)

· 370 billion yuan to improve people’s lives and infrastructure in rural areas (US$54bn)

· 180 billion yuan to build highways, railroads, and the power grid (US$26bn)

· 40 billion yuan for medical care and education (US$6bn)

· 350 billion yuan for ecological and environmental projects (US$51bn)

· 160 billion yuan to fund R&D and innovation projects (US$23bn)

· 1 trillion yuan for places worst hit by the earthquakes (US$146bn)

The new details of the stimulus plan have been revealed together at the same time as China’s total domestic investment was forecast to reach 18 trillion yuan in 2009. (US$2.6tr)

For 2008 total investment is expected to reach 16 trillion yuan, while last year it was 13 trillion yuan. The four-trillion-yuan stimulus package is just part of all the investment China needs to drive its economy.

Among the financial stimulus plan, 350 billion yuan will be spent on improving the ecological environment and treating pollution, Zhang said. The four-trillion-yuan investment will not be spent in the energy and resource-intensive industries or high-pollution industries.

Zhou Shengxian, minister of environmental protection, said earlier that the main targets of environmental investment will go to beef up rural environmental efforts. He said China’s fledgling green industries, such as those involved in the development of renewable energies and pollution treatment, will also benefit from the investment plan.

Further aspects to the NDRC’s plans to stimulate the economy have also been released, including a review of the fuel tax reform formula, undertaken with other government departments. Once the formula is ready, it will be released to seek public opinion on amendments, said Zhang at the press conference.

“The goal for fuel reform is to highlight four concepts, which are fair taxation, a regulated charging system, energy conservation and less financial burden for people,” Zhang said.

“It is fair that the more people consume oil the more they have to pay for it,” Zhang said. By replacing the maintenance fee for roads, navigation systems and road tolls with a fuel tax, car owners will pay less than before.

“By replacing the fees with fuel taxes, we also hope to regulate road toll stations that used to charge drivers for no legal reason,” he added.

Much as been made of the package that Beijing announced last week. There has been debate about whether it is all “new” money or re-hashed and re-presented programs already under way. There has been some discussion about whether the package is going to save the Chinese economy from a hard landing, and whether the package will sufficiently replace the falling export numbers. And there has been debate about just how much good the package will bring to the rest of the world.

Here at AZ China, we believe strongly in a fact-based approach. To help you in your efforts to develop your own position on these and other questions, we present for you a translation of the “Ten Measures” announcement. While it’s true that no values were placed against each item, it is interesting to see where the Government has placed its focus.

We invite you to both draw your own conclusions and to comment on the measures here.

Note, this is our own translation of the document, not the official version. Thanks to Charlene Qu.

1. Speed up the construction of housing projects. Increase support for building low-cost housing, speed up the transformation of shanty towns, implement a project to settle nomadic people, enlarge the program to repair dangerous buildings in rural areas.

2. Speed up the construction of projects for basic facilities in rural areas. Expand the construction of rural area marsh gas, drinking water safety project and rural area roads ,improve and perfect the rural electricity network, speed up projects for diverting water from the south to the north, important water conservancy project construction, speed up to reinforce weak and dangerous reservoirs, strengthen water saving for large-scale irrigated areas. Expand “help the poor” development.

3. Speed up the construction of railways, roads and airports and other important basic facilities. Key construction projects are a patch of passenger transport special line, coal transport tunnel project and western China main line railway. Improve and perfect highway and express networks, arrange the construction for central and western regions main airports and branch airports, speed up the transformation of urban electricity network.

4. Speed up the development of medical health, cultural and educational undertakings, basic medical construction, speed up the transformation of central and western regions’ rural area schoolhouses. Promote the construction of central and western regions` special education schools and villages and towns comprehensive cultural centres.

5. Strengthen ecological environment construction projects. Speed up the construction of urban waste water and refuse dispose installations ,and key area water pollution prevention. Strengthen the protection of important shelterbelt and natural forests, support key energy conservation and discharge decreasing project construction.

6. Speed up ” independent innovation” and ” structural adjustment”. Support high technology industrialization construction and industrial technology improvement, support the development of service industries. Support the “three rural”, small and medium enterprises and technological transformation, credit support of mergers and acquisitions, consolidate consumer credit growth.

7. Speed up all the after-earthquake rebuilding works in those earthquake-stricken areas.

8. Improve urban and rural residents` income. Improve next year`s lowest purchasing price for grain, Improve the comprehensive agricultural subsidies, subsidies for high quality seeds, agricultural equipment subsidies and other standards, and increase peasant’s income. Improve the treatment for low income groups and other targets of social security, increase urban and rural low social security subsidies. Continue to improve the basic old-age pensions for retirees and also subsistence allowances standards for people being given special care.

9. In all domestic areas, all industry have to fully implement value-added tax reform and restructuring to encourage technological upgrading of enterprises, reduce 120,000,000,000 Yuan burdens on enterprises.

10. Strengthen financial support to economic growth. Cancel the restrictions on the size of commercial bank`s credit, a reasonable scale of credit expansion, increase support on important programs.