Cha-Ching for China

From: Lexi Chase

http://www.nytimes.com/2008/11/10/world/asia/10china.html?_r=1&hp&oref=slogin

China has unveiled a gigantic economic stimulus plan of roughly $586 Billion, the largest ever constructed by the Chinese government. With the global market and economy so significantly down, this is China's bold effort to [hopefully] pull itself up by its bootstraps. The plan consists of:

A) Fueling major infrastructure projects such as building railways, airports, and subways to aid in travel and the domestic transport of goods. China is also planning to rebuild the communities that have been wrecked by an earthquake earlier this year. China's aim is that both the global community, as well as their own country, will re-invest their confidence in the Chinese economy when they see that the infrastructure as a whole is strengthening.

B) Representing "a fresh commitment by China to keep from adding to the economic and financial woes of the United States and Europe." Essentially, by announcing a $586 Billion bail-out plan, China is hoping that the increasing stability of their own domestic economy will encourage foreign nations and investors TO continue investing in them. So far, it seems to be working in their favor. According to the article, stocks in Shanghai and Hong Kong jumped 5%, which lifted share prices. This is... a good thing.

C) Bailing-out and reeling in its own people. With the suffering global and domestic economies (aka a decrease in investments and exports), China has closed many factories and layed-off mass amounts of its own workers. Without jobs, how could people fuel their own economy? Obviously, they can't. The $586 Billion is also going to be used to encourage state-owned banks to lend money to the people-- similar to the way the US bail-out is being used to rescue the banks, businesses, and housing markets. With jobs being regained and money being made, consumer spending can begin again as the Chinese people see they can have confidence in the economy.