China Unveils RMB4 TRN Fiscal Stimulus Plan        

The government on November 5th announced measures tapping 10 areas to spur domestic demand and economic growth, with total investment budget estimated at RMB4 trillion by the end of 2010.
    The measures cover 10 areas, ranging from budget housing, infrastructure construction, health care, education, environmental protection, industrial innovation, post-earthquake rebuilding, raising people's income as well as reform in the value added tax regime.
   To accelerate the construction progress, China would invest an extra RMB100 billion from central government in the fourth quarter. It has also brought forward RMB20 billion from next year's budget for earthquake reconstruction. This brings total investment in the quarter to RMB400 billion.
   Such resolute measures show Chinese government's determination for a stable and relatively fast economic growth, as well as its commitment to helping the world counter recession.
   Following the State Council announcement, Qiu Baoxing, vice minister of the Ministry of Housing and Urban/Rural Development of China, said the central government will grant large scale subsidies in improving urban and rural water conditions, waste water control and treatment, with combined budget of RMB13.5 billion in two years.
    The Civil Aviation Administration of China said the central government has initially decided to add investment of RMB30 billion for civil aviation sector this year, and approved a budget of RMB200 billion for next year and RMB250 billion for 2010 to improve civil aviation infrastructure to beef up security and boost domestic growth.
   And a People's Bank of China official also said the central bank will lead the policy banks to add another RMB100 billion of loans by the end of the year to finance construction of key projects and the purchase of agricultural and related products. The central bank also encourages commercial lenders to provide loan facilities for the RMB10 billion central government-approved projects. It is estimated that China's total new RMB loans for the year will exceed RMB4 trillion.
   Since the announcement of the RMB4 trillion fiscal stimulus package, share prices of building materials makers, machinery manufacturers have surged. Industry watchers estimate the RMB4 trillion spending would translate into additional cement demand of over 500 million tons.
   As for the chemical industry, the stimulus package would also boost domestic demand for inorganic chemical products, chemical materials, coatings, plastics and rubbers.
   And the machinery sector is expected to get rid of depression.
    "The RMB4 trillion plan, which will be implemented in the next two years, would be able to help the economy grow annually 8.4%," said one economist. "China's trade surplus accounts for 9% of its gross domestic production in 2008. That says, the stimulus plan would help Chinese economy roughly set off the impact of global economic volatility."