Four Trillion---Big Hope in Crisis

As the response to the unfavorable impacts of global financial crisis on Chinese economy, Chinese government has taken ten measures in November, 2008 to further expand domestic demands and facilitate economy, for which an investment of approx. RMB4t is needed. The number of four trillion has become the limelight and the most popular “figure star” in 2008 in a flash. It not only manifests a big adjustment of China’s policies on macro-economy, but also signifies that Chinese economic growth mode which is mainly driven by export in 30 years since Opening-up, has transferred to the one mainly driven by domestic demand. Confronting global financial crisis, Chinese government shows an image of great country, which is responsible, efficient and farsighted. The world is expecting China may play a more active role in the financial crisis.

Three Measures to Keep Growth Rate at 8%

As reported, about 1tn investment of the 4tn one in this and next years is expected to be implemented at the end of Feb. 2009. The questions whether the policies on expanding domestic demand can take effect and whether the objective of keeping growth rate at 8% may be achieved are explicitly answered in the report of Analysis on Chinese Economic Development Trend 2009 by the State Information Center. The Report points out that the active policies issued by the Central Government in 2008 will exert an obvious function on stabling domestic demand in China. Among these policies, three measures, that is, tax reduction, increase of expenditure and increase of income of urban residents will push the growth of GDP by 0.7%, 1.7% and 0.5% respectively. Meanwhile, it is estimated that the absolute growth rate of 2009 will be 7.9% and that of import and export will be 0%. The growth rate of fiscal revenues will be 8% and that of CPI will be 0%. The newly-added number of employers will be 7.2m.

The Report said: “In general, the first half of 2009 will be the hardest period for Chinese economic growth and with the full adjustment of warehousing cycles and the gradual realization of the effects of macro-regulation policies, the economy in the second half of the year will rebound.” Since international economy will be in recession in 2009, under the pressures of periodical and structural adjustments, Chinese economy is likely to decline and it will remain in the adjustment cycle of declination as whole, which may take 2-3 years, even longer.

Initial Effects of the 4t-economic Stimulus
Since the implementation of the 4t-economic stimulus, multiple indicators from production to credit shown that the declination of economy is tend to slow down and the macro-stimulus has achieved initial effects. Firstly, the manufacturing industry seems to reach the bottom. Since December 2008, the economic declination started to slow down in production sector and some enterprises had increased sales, decreased storages and growing consumption of power. The link relative of power consumption rose comparatively. According to the report of China Electricity Council on Jan.6, though the total power consumption amount was 0.27t kwh in December 2008, down by 6.5% year-by-year, compared with November, the figure shown the link relative rose by 6.8%. According to the figure, China International Capital Corporation (CICC) estimated that the industrial growth rate of December would be higher than that of November, which was at 5.4%. Moreover, the credit scale is on a fast increase. Data from authoritative source indicated that the newly-added loans of financial institutions reached RMB740b, the record of newly-added loan in a month since January in last year.