Beijing's diversion of 300 billion yuan (HK$340.26 billion) in its stimulus from the infrastructure sector to social welfare will weaken its already shaky ability to meet its 8 per cent gross domestic product growth target this year, even though the shift will boost employment, analysts say. The change in the 4 trillion yuan stimulus package enhanced the central government's priority and increased spending in social welfare as the livelihood of a growing number of ordinary people suffers in the worst economic downturn in decades. The stimulus package launched in November last year involved aggressive monetary easing and pump-priming as well as tax breaks for manufacturers. Recognising government spending was insufficient to offset the negative economic effects, mainland policymakers had also set their sights on boosting consumption, said Jing Ulrich, the chairman of China equities at JP Morgan. By spending more to improve the lot of ordinary citizens, officials hope that will spur domestic consumption as external demand plunges. At the National People's Congress early last month, the government said it would shift 300 billion yuan from infrastructure and 140 billion yuan from projects on energy conservation and sustainability. Of the combined amount, 210 billion yuan will be transferred to technology projects and 120 billion yuan to rural public works including affordable housing. The remaining 110 billion yuan will be used in social welfare programmes such as health care and education, raising the original budget nearly fourfold from 40 billion yuan to 150 billion yuan. National Development and Reform Commission director Zhang Ping said the changes were based on feedback from the public, according to Caijing magazine. 'It's about 10 per cent of the 4 trillion yuan stimulus that is being moved around. The numbers are not that big. But for the direction, it's significant. The actual importance is China wants to do more reform rather than only put in more money,' said Jerry Lou, the China strategist at Morgan Stanley. 'The stimulus has to come from consumers too, not just the government. That is where affordable housing, health care and education come in. This is an early indication regarding China's future allocation of resources. 'If you see any more stimulus in future, it will be oriented towards health care, education and affordable housing.' Premier Wen Jiabao at last month's NPC session stressed that various spending programmes underlined the increasing importance Beijing is giving to social welfare. 'This year, we will concentrate on accomplishing major tasks that are urgently needed in economic and social development and directly related to the vital interests of the people to improve well-being,' he said. He unveiled details of a separate health-care reform plan in which government bodies at all levels would invest 850 billion yuan in the next three years, including 331.8 billion yuan from the central government. To shore up domestic demand, Premier Wen said the central government planned to spend 293 billion yuan on building its social safety net this year, up 17.6 per cent from last year. The money will fund pensions, medical insurance, unemployment insurance and living allowances to low-income groups. Ultimately, the resources needed to totally fix China's social safety net problem were much bigger, requiring over 10 trillion yuan, Credit Suisse economist Dong Tao estimated. A broadening of the social security insurance programme to cover the poorest 20 per cent of urban residents would directly lift consumer spending by 10 billion yuan, Cai Fang, a specialist at the China Academy of Social Sciences, was quoted by Caijing as saying. 'China's export engine is cooling off very quickly. The challenge for the government is to find a different engine to fill the gap. You have to make sure structural changes will boost domestic consumer demand,' said Mr Lou. The nation's exports fell 17.1 per cent last month from a year ago, but the deceleration slowed from 25.7 per cent recorded for February, its worst decline in more than 10 years. 'China built roads, factories, ports to serve US customers. Right now, US customers are not buying. What's the point of building more infrastructure?' said Mr Lou. 'If you drive 8 per cent GDP growth with infrastructure, the quality of growth will be poor, at least from a profitability point of view. It's basically government demand, and the state sector is normally less efficient than the private sector.' Mr Lou said every dollar taken away from infrastructure would push the 8 per cent target further because such investment type is the most directly controllable by Beijing. CLSA's head of economic research Eric Fishwick agreed. 'There is an immediate need to cushion the dramatic fall in exports. Moving money from hard infrastructure to health care and education addresses long-term needs but reduces the short-term stimulus.' But Mr Wen has assured that the government could introduce further stimuli if more were needed. All eyes are therefore on the first quarter economic numbers.