Stimulus to focus on living standards

PUBLISHED : Saturday, 13 December, 2008, 12:00am
UPDATED : Saturday, 13 December, 2008, 12:00am

Amid concerns about the impact of Beijing's 4 trillion yuan (HK$4.5 trillion) stimulus plan, the mainland's economic managers yesterday stressed that most of the money would go into projects to raise living standards, not industrial output.

In a statement broadcast by China Central Television, the National Development and Reform Commission said the money would be spent on five areas - agriculture, public housing, removing transport bottlenecks, environmental protection and renovating schools.

The plan to spend 4 trillion yuan in the next few years to save the economy from a catastrophic slowdown has won widespread support from domestic and overseas observers.

But the plan is not without flaws. One of the biggest criticisms from economists is that the unprecedented investment will result in excess manufacturing capacity, pushing the economy to the point of overheating when the financial crisis ends.

But the commission's statement signalled that the central government had no intention of letting that happen.

Investment in large and medium-sized reservoirs, dams, hydropower stations, water pipelines and water diversion projects for irrigation would increase dramatically next year, the statement said.

The proportion of the stimulus package to be devoted to the agricultural sector is 370 billion yuan, with the goal of increasing annual production of rice, wheat and corn by 50 million tonnes.

In the public housing sector, the government will build up a large stock of low-cost homes for rent.

Investment in transport infrastructure will focus on improving connections between existing traffic networks, often the main cause of traffic jams in big cities and road accidents.

Beijing plans a 700 billion yuan railway construction boom next year that could create 6 million jobs.

The government will also pump money into the environmental sector, particularly projects related to improving the energy efficiency of manufacturing plants.

Sewage systems in urban areas, rubbish collection and waste processing facilities will also be built or upgraded.

Hundreds of thousands of school buildings will be renovated, especially primary and middle schools in less developed regions where many structures were built decades ago and are in danger of collapse.

The statement was in line with the guidelines approved by the central economic work conference, which concluded on Wednesday.

At the top-level meeting, policymakers pledged an all-out effort to ensure strong growth next year after exports plunged, domestic demand shrank and the inflow of foreign investment dropped sharply last month.

The government will increase spending by a 'relatively large margin' and cut taxes next year to increase support for job creation, agriculture, social security, education, energy conservation, and small and medium-sized enterprises.

Growing importance

The stimulus package allowance for the agricultural sector is 370 billion yuan

The aim is to increase annual production of rice, wheat and corn, in tonnes, by: 50m