(1888PressRelease)
November 15, 2008 - London, The Chinese government announced Sunday that it would ease credit conditions, slash taxes and invest in national infrastructure projects to boost demand in the home market.
Latest in the line of countries to announce a fiscal stimulus plan to boost the economy, China’s package would amount to about 7 percent of the Chinese gross domestic product over the next two years. After five years of growth in excess of 10 percent, many economists are now projecting that Chinese economic growth could slow to 5.8 percent in the fourth quarter. As inflation falls from a twelve year high of 8.7 percent in February to 4.6 percent in September, the Chinese government is aggressively pursing pro-growth strategies.
While announcing the package, the State Council stated, "Over the past two months, the global financial crisis has been intensifying daily. In expanding investment, we must be fast and heavy-handed”.
The stimulus package will be used to finance programs, over the next two years in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding disaster struck areas like the Sichuan.
While announcing that the credit expansion must be “rational”, the State Council added that it should "target spheres that would promote and consolidate the expansion of consumer credit."
The government also plans to reform value-added taxes cutting industry costs by 120 billion yuan. Credit ceilings for commercial banks will eliminated to promote lending to priority areas such as SMEs and rural areas.
While commenting on the stimulus plan, Dominique Strauss-Kahn, International Monetary Fund (IMF) Chief, said, "It's a huge package It will have an influence not only on the world economy in supporting demand but also a lot of influence on the Chinese economy itself, and I think it is good news for correcting imbalances."
"As long as we take the right measures in a resolute and timely way to grasp the chance and rise to the challenges, we will surely secure steady and relative fast economic growth," the State Council meeting noted.
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