s the global economic crisis has deepened, the PRCgovernment has become increasingly concernedabout the impact of the crisis on China’s economy and has launched various efforts in response.
Central stimulus plan
The centerpiece of China’s response is the massive ¥4trillion ($585 billion) stimulus plan announced lastNovember. Stimulus spending will focus on transportationconstruction, Sichuan earthquake reconstruction, ruralinfrastructure projects, environmental protection, housingprojects, indigenous innovation (China’s strategy todevelop domestic innovative and technological capabilitiesover the next decade), and healthcare and education. Eachof these broad categories conforms to a set of policy goalsalready outlined in China’s 11th Five-Year Plan(2006–10). About ¥1.18 trillion ($263 billion) of thestimulus is slated to come directly from the centralgovernment, while the remaining funds will be providedby provincial and local governments, state-owned andprivate enterprises, and policy and commercial bank loans.The State Council allocated ¥120 billion ($17.5 billion) of central government funds for deployment in Novemberand December 2008 and plans to spread the remainingstimulus spending over the next few years.Officials at the PRC National Development and ReformCommission (NDRC), the primary agency responsible forapproving stimulus package spending, said in January that it would funnel ¥100 billion ($14.6 billion) of the stimulusfunds into local government projects for implementationbefore March, when China’s National People’s Congressconvenes. Though NDRC retains primacy in the initialapproval of stimulus projects, local ministry and provincialofficials will have the final say in project implementationand execution. In general, projects worth more than ¥30million ($4.4 million) in funding will need NDRCapproval, while those over ¥200 million ($29.2 million)require NDRC and State Council approval. Recentconversations with NDRC suggest that provincial projectsthat do not involve national funds will not require NDRCapproval, provided that the projects are not in prohibited orsensitive industries as described in NDRC’s Approval andFiling catalogues.In early February, NDRC announced that it will spend¥130 billion ($19.0 billion) more on several nationalprojects that involve public facilities, low-income housing,infrastructure, health and education, economicrestructuring, and the environment, though no timeframe was given for the spending. NDRC officials have indicatedto the US-China Business Council (USCBC) that thisround of stimulus spending is separate from the ¥100billion package announced in mid-January but still a partof the ¥4 trillion announced in November. NDRC will work with various ministries on the approval and fundingof central-government-sponsored projects and retain itsapproval authority over non-national stimulus projects.
Other policies: exports and consumption
Beyond the stimulus package, China has also takensignificant steps to boost the export sector. Mostimportant, cuts in export value-added tax (VAT) rebatesmade in summer 2007 have been reversed and restrictionson processing trade eased. The renminbi, which had beensteadily appreciating since July 2005, has held fairly steady since July 2008. The People’s Bank of China has slashedinterest rates, raised lending quotas for banks, and pushedfor more loans to struggling small and medium-sizedenterprises.In another move to prop up China’s economy, in lateDecember the State Council issued the Opinion onStimulating Circulation and Expanding Consumption.Drafted mainly by the PRC Ministry of Commerce andlargely a vague restatement of basic principles laid out inprevious announcements, the opinion includes 20 measuresto invigorate consumption. Starting in February, the HomeElectronics to the Countryside program, which providescash subsidies of 13 percent for rural residents’ purchases of home appliances, was expanded to cover the entire nation.Motorcycles, water heaters, computers, and air conditionershave joined televisions, refrigerators, washing machines, andmobile phones on the list of products that may besubsidized by provincial governments. The opinion alsonotes the government will improve the rural logisticsnetwork and set up more rural goods distribution centers.For urban areas, the opinion contains vague provisions onimproving community services to stimulate consumptionand highlights potential changes to stimulate the autosector, which has slowed significantly in recent months.
Industry-specific revitalization plans
As promised in earlier State Council documents, PRCgovernment agencies drafted revitalization plans for severalkey industries. The industries are iron and steel, autos,shipbuilding, petrochemicals, textiles, light industry,nonferrous metals, equipment manufacturing, logistics, andelectronics and information technology (IT). Key measures