Beyond the Stimulus

The 4 trillion yuan plan is only one part of the government’s push to bolster China’s economy.

“We have prepared solutions for more daunting difficulties, and can propose new economic stimulus policies at any time as needed,” Wen said at the NPC press conference March 13.

Jia told Caijing that if economic data for May and June do not indicate that the economy will turn around in the second half of the year, a new round of stimulus spending should be launched.

Jia said the government may have to “adopt a new expansion plan to further bolster economy.”

Wen said the 4 trillion yuan package was “not understood fully.” Actually, he said, it’s one element in a basket of plans.

Also in the basket are plans for revitalizing industries, as proposed by the Politburo on February 23. Starting this year, China will adopt a new value-added tax (VAT) policy and raise tax rebates for exports, as well as implement favorable tax policies for small- to medium-sized, real estate and securities trading.

According to UBS Securities China chief economist Wang Tao, tax revenues this year will fall by 300 billion yuan, while the fiscal stimulus is expected to contribute to 3 percent of GDP.

Already, some aspects of the stimulus plan have been revised. NPC delegates were told that infrastructure investments would be cut by 300 billion yuan from the initial plan, while spending for low-income housing would rise to 400 billion yuan from the original 280 billion yuan.

The stimulus package “is actually a process of give and take,” said the NDRC’s Zhang. “Many projects, perhaps, will see changes in practice as situations are not unchanged.