Thursday, December 4, 2008

How China will spend the stimulus package

From what I can work out this is how China will use its huge stimulus package. (and more will come if needed) The structural changes to its financial system are of course critical in conjunction with the injection of capital

280 billion yuan for housing projects
370 billion yuan to improve people's lives and infrastructure in rural areas
180 billion yuan to build highways, railroads, and the power grid
40 billion yuan for medical care and education
350 billion yuan for ecological and environmental projects
160 billion yuan to fund R&D and innovation projects
1 trillion yuan for places worst hit by the earthquakes

This will make a difference especially in the areas of public housing, health and the "welfare areas". Chinese families are reluctant to spend because of fears around these three areas. if the government can demonstrate that it is going to take more responsibility in these areas the hope is families will loosen the purse strings and domestic consumption will rise. Other areas are aimed at boosting employment to compensate for the manufacturing slow down.

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