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China's new economic plan

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James Reynolds | 08:50 UK time, Monday, 10 November 2008

Remember what they teach you in basic manners class: if you're invited to someone's house, don't turn up empty-handed.

Shoppers in ChinaChina's president Hu Jintao is going to Washington in a few days for a summit to discuss the global financial crisis. Now he has something to show his hosts: a new economic plan.

The Chinese government has just announced a series of measures worth $586bn. The plan includes spending on infrastructure, housing, healthcare, and disaster relief. The measures are designed to make sure that China's economy keeps going - and that its people start spending.

Here's what makes the package necessary: the global downturn has begun to affect China. Put simply: since consumers in the West can no longer afford to buy as much, China can't sell as much. So, China's growth has dropped to 9% from over 10% a year ago. Exports have fallen. Factories have shut down. 67,000 small and medium businesses so far have gone bust this year.

Here's why all of this worries the government: fewer jobs means more social unrest. In recent weeks there've been reports of protests and marches by workers who've lost their jobs. More than anything else, the Communist Party hates instability.

So, the government will hope that its $586bn package helps out. It's something for Hu Jintao to discuss with his fellow world leaders when he gets to Washington.

PS. For those who've read my previous entry, Hu Jintao and Barack Obama have now actually spoken on the phone. They did so on Saturday.


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