China's stimulus package gets bigger

Beijing: Projects planned by provincial governments will add an additional 10 trillion yuan ($1.46 trillion) to the value of China's economic stimulus package, state television said yesterday, even as the country's premier called on businesses to keep up their confidence.

The central government earlier this month announced a four trillion yuan stimulus package, including rail and infrastructure projects as well as increased social spending, as China strives to offset a sharp drop in demand for the exports which fuel its economy.

The People's Bank of China must pay more attention to the structural adjustment of the economy, as it combats the impact of the global financial crisis, governor Zhou Xiaochuan said in remarks published on the central bank's website.

He called for "more understanding of the financial requirements of the restructuring" and reiterated that small and medium enterprises, the service sector, energy-efficient projects and rural projects were priorities for financial support.

Despite strong talk of boosting China's domestic consumption, details of specific new projects and areas of spending are only slowly emerging.

"Within the last week, provincial governments have announced accompanying stimulus programmes amounting to 10 trillion yuan," Central China Television said in its noon broadcast.

"Among the largest investment plans are that of Yunnan province, at three trillion yuan, and Guangdong at 2.3 trillion yuan."

The planned investments span many sectors, including rail, roads, ports and housing, CCTV said. The spending will emphasise rural infrastructure, it added.

China's state media has launched a propaganda drive to encourage domestic consumption and bolster confidence. Yesterday, state-run media reported calls for confidence by premier Wen Jiabao as he visited the wealthy Yangtze Delta, a hub for banking and export-oriented private businesses.

China's annual GDP increase slowed to nine per cent in the third quarter from 10.1 per cent in the second quarter, putting the economy in line for single-digit growth in 2008 after five straight years of double-digit expansion.

While China's stimulus package was initially welcomed as a boost to a world worried about increasing economic gloom, some economists later concluded that its impact could be limited, as much of the spending appeared to be previously budgeted items.

The central government has granted 4.8 billion yuan to building rural healthcare, particularly hospitals and clinics, the Xinhua news agency said yesterday, as part of its commitment to increase spending rural medical care in 2008.

Still, the funding mechanism for many of the announced projects is unclear, while reported numbers are often in flux.

For instance, Sichuan officials said on Friday that most of the estimated three trillion yuan needed for stimulating demand in the province, as well as the three-year reconstruction of towns devastated by a May 12 earthquake, would come from society, including banks and businesses.

The central government would provide 200 billion yuan and the provincial government 300 billion yuan, said vice-governor Wei Hong.

His estimate was triple the one trillion yuan announced for earthquake reconstruction by the National Development and Reform Commission.