Stimulus package wins praise

(China Daily)
Updated: 2008-11-11 07:19

The massive stimulus plan announced by China over the weekend to counter the effects of a global slowdown on its economy drew praise from world leaders and economists, and sent stocks rising around the world Monday.

Australian Prime Minister Kevin Rudd said the package was good news for his nation.

"I regard that as very good news for this economy, very good news for the regional economy, very good news for the global economy, and it is certainly consistent with many discussions that the treasurer and myself have had with various Chinese counterparts in recent weeks," he said.

British Prime Minister Gordon Brown also welcomed China's move and said he looked forward to discussions at a Washington meeting this weekend of leaders from the Group of 20 (G20) major economies, which President Hu Jintao is due to attend.

The move could benefit other nations gripped in the global financial crisis, David McCormick, the US Treasury Department's undersecretary for international affairs, told reporters in Sao Paulo, Brazil, on Sunday.

McCormick was attending the annual meeting of finance ministers and central bank governors of the G20 developed countries and emerging economies.

Brazilian Finance Minister Guido Mantega, who chaired the Sao Paulo meeting, said China has taken "the lead" to avoid an economic slowdown amid international financial turmoil.

He said China's plan is an "anti-cyclic" policy to avoid the shrinking of the economy.

The mainland and other Asian stock markets gained strongly yesterday in response to the stimulus package.

Shanghai's benchmark index spiked more than 7 percent, as investors welcomed the $586 billion stimulus plan aimed at boosting domestic demand.

Hong Kong's Hang Seng Index gained 501.20 points, or 3.5 percent, to 14744.63, though it ended well off its highs.

US shares opened strongly, with the Dow Jones index of leading shares up 141.14 points, or 1.6 percent.

In Europe, The FTSE 100 index of leading British shares was up 78.78 points, or 1.8 percent, while Germany's DAX was 116.78 points up, or 2.4 percent.

Tokyo's Nikkei 225 stock average surged 498.43 points, or 5.8 percent, to 9081.43.

Markets in India, Australia, Singapore and South Korea joined the region's advance.

The State Council, or the Cabinet, said on Sunday that it would increase spending in 10 sectors, including housing, rural infrastructure, railways, highways and airports.

The news lifted sagging oil prices on hopes that it would stimulate energy demand. Oil rose $2.69 to $63.70 a barrel in Asian trading on the New York Mercantile exchange.

"This broad-based fiscal stimulus program will emerge as the government's frontline of defense against an excessive economic slowdown," Jing Ulrich, J.P. Morgan & Co's chairwoman for China, said in a note to clients.

"This pro-growth policy response will help translate the balance sheet strength of the economy into economic growth resilience, limiting the extreme downside risk to the economy," Wang Qing, chief economist of Morgan Stanley Greater China, said.

But some economists noted the size of the stimulus may be smaller than advertised. Then there is the question of how much is actual new spending.

"The stimulus package is big, but it's actually a combination of a lot of things that have already been announced," said Ken Peng, a Citigroup economist in Shanghai.

The plan includes projects already under way, including reconstruction from the devastating May earthquake in Sichuan, said Sherman Chan, an economist for Moody's Economy.com.

It highlights the government's resolve "to revive sentiment, which is perhaps the key factor to sustaining growth amid global turmoil", Chan said in a report.