China unveils US$ 586 billion "Economic stimulus plan"

The Chinese government has unveiled a U$ 586 billion "Economic stimulus plan" that will be used to finance programs in 10 major areas over the next two years The money represents about 7% of its GDP each year.

The package, which was announced by the State Council, or cabinet, is the largest economic stimulus effort ever undertaken by the Chinese government.

In a statement, the State council said, "Over the past two months, the global financial crisis has been intensifying daily. In expanding investment, we must be fast and heavy-handed."

The government said the stimulus would cover 10 areas, including low-income housing, electricity, water, rural infrastructure and projects aimed at environmental protection and technological innovation, as well as rebuilding from several disasters, most notably the May 12 earthquake in Sichuan Province.

Investment in these areas is expected to "stimulate domestic consumption and growth".

The State Council said the new spending would begin immediately, with US$ 18 billion scheduled for the last quarter of this year.

Details of the investment include:

Housing: Building more affordable and low-rent housing and speeding up slum clearance in major cities. A pilot program to rebuild rural housing will expand, while nomadic tribes will be encouraged to settle.

Rural infrastructure: Efforts will be made to speed up rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure safe drinking water.

This also involves expediting the North-South water diversion project. Water conservation in large-scale irrigation areas will be strengthened. Poverty relief efforts will be increased.

Transport: Accelerating the growth of the transport network, including more passenger rail links and coal routes . Trunk railways will be extended and more airports will be built in western areas (see last week's WCW for more information on this part of the initiative). Urban power grids will also be upgraded.

Health and education: Investment in the health and medical service will be increased by improving the grass roots medical system. Accelerated development of culture and education, and junior high school construction in rural western and central areas will also be part of the package, alongside newly constructed special education and cultural facilities.

Environment: Improving environmental protection by enhancing the construction of sewage and refuse treatment facilities as well as preventing water pollution in key areas. Accelerating green belt and natural forest planting programs also forms part of the package, as does increasing support for energy conservation and pollution-control projects.

Industry: Enhancing innovation and industrial restructuring and supporting the development of high-tech and service industries.

Disaster rebuilding: Speeding reconstruction in areas hit by the May 12 earthquake.