Business

Monday February 9, 2009

China’s stimulus strength

Between The Lines - By C.S. Tan


THE Shanghai stock market has just overtaken the smallish Sri Lanka market as the region’s best performing this year, that is, in the last 1½ months.

The Shanghai Composite Index rallied almost 20% in that short span of time, in contrast to the decline of 8% of the Dow Jones Industrial Average in the US during the same period.

One of the factors for this “decoupling” in performance is the growing confidence in China that its government’s massive stimulus programme will be speedily implemented, with the full support of its banks under its command economy.

On the other side of the Pacific Ocean, President Barack Obama’s stimulus package is still in its legislative process while the big banks are still dysfunctional and need to be propped up with enormous amounts of government aid.

China’s stimulus package of US$600bil – amounting to about 14% of its gross domestic product (GDP) over two years, or 7% a year – is relatively larger than that of the US’ package of US$819bil, about 6% of its GDP over two years.

There is also the small matter that China’s stimulus spending will be largely funded from the government’s budget surplus while the US will have to issue more government bonds or print more money.

There are indications the Chinese stimulus is in full swing. Economists estimated record bank lending of over US$1 trillion in China last month, compared with US$5 trillion last year.

It appears infrastructure contractors are raising working capital for jobs under the stimulus plan. That will also be supportive of global metal prices and shipping rates.


For Another perspective from the China Daily, a partner of Asia News Network, click here


Latest NYSE, NASDAQ and other business news, from AP-Wire


For latest Bursa Malaysia indices, charts and other information click here

New York Stock Exchange:
http://www.nyse.com

Nasdaq Stock Market:
http://www.nasdaq.com


For Tokyo Stock Exchange click here

  • E-mail this story
  • Print this story