By JOE McDONALD
2008-11-23 09:48 PM
The central government's announcement of a 4 trillion yuan ($586 billion) stimulus earlier this month electrified investors and briefly boosted global markets. But as details were released, it became clear China's plan included less new spending than initially thought. Similar concerns are already being raised about Sunday's proposals.
The key to the national package's success will be its ability to reassure consumers, which makes its emotional impact as important as its actual size and gives Communist leaders an incentive to embellish figures.
On Sunday, China Central Television said spending plans announced over the past week by provincial governments totaled 10 trillion yuan ($1.4 trillion). But it gave few details and no indication how much of that figure represents new spending, as opposed to plans announced earlier.
"Within a week, the governments of various provinces announced massive-scale investment blueprints," the CCTV report said. "Based on a rough calculation, the current total investment by all the provinces and cities has already exceeded 10 trillion yuan."
The biggest proposal came from Yunnan province in the southwest, which plans to invest 3 trillion yuan ($439 billion) over the next five years, CCTV said. The booming southeastern province of Guangdong proposed 2.3 trillion yuan ($337 billion) in investments.
Zhang Liqun, a researcher at a think tank attached to the Cabinet's planning agency, said the provinces' planned spending is mainly on projects related to railways, roads, ports and low-income housing, according to CCTV.
"It will have quite an obvious effect on the country's medium-and long-term economic development," Zhang said.
But 21st Century Business Herald, a major Chinese business newspaper, said few investments announced by the provinces were new. It said most are either already under construction, have been under discussion for some time or had been planned but not begun due to lack of money. Provinces may have revived some of those defunct projects in the hopes that the difficult financial times would persuade Beijing to fund them.
The newspaper said much of the proposed provincial spending is still awaiting national approval.
China's economic growth slowed in the latest quarter to 9 percent, down from last year's 11.9 percent. That would be the highest of any major economy, but leaders are alarmed at the rapid drop in growth and worry that rising layoffs could trigger unrest.
Analysts have suggested Beijing threw as many projects as it could into its national plan, including many already under way, to produce a dramatic price tag that would encourage consumers and companies to spend.
The stimulus, announced Nov. 9, is aimed at boosting domestic consumer spending to reduce China's reliance on the cooling global export market. It calls for higher spending on highways and other construction, social programs and tax cuts.
Analysts have said the package includes projects already covered by its five-year plan that runs through 2010. But Frank F.X. Gong, chief regional economist for JP Morgan & Co., says it still calls for some 1.6 trillion yuan ($234 billion) in spending on top of previously announced projects.
The central government says it will provide 1.8 trillion yuan ($290 billion) of the stimulus spending, while local governments and state companies will supply the rest.
On Sunday, Premier Wen Jiabao, China's top economic official, called for companies to boost confidence and adapt to market changes to weather the global crisis, the official Xinhua News Agency reported.
"Enterprises must have confidence for them to stabilize market expectations. Confidence is what they need to tide over the difficult times," Wen was quoted as saying during a tour of businesses in Shanghai and the eastern province of Zhejiang.
Also Sunday, central bank Gov. Zhou Xiaochuan called for stepped-up efforts to carry out the government's pledge of more financial support to small and medium-size companies and to improve environmental protection and rural development, Xinhua said.