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Source: Yet Another Stimulus Plan in China's Policy Pipeline
Summary:

Cover story, issue 395, Nov. 24, 2008
Original article:[
Chinese]

Two weeks after announcing a RMB 4 trillion investment plan, China was drafting yet another stimulus package to fuel that other engine of China's growth: domestic consumption.

According to one source involved in the plan's research, the latest package being considered would include higher thresholds for individual income taxes, provisions to increase salaries, long-term subsidies to low-income groups, and more generous housing subsidies, among other measures.

The package was first proposed by the State Council, and was now being formulated by the National Development and Reform Commission (NDRC), China's top macroeconomic policymaker, the source said.

Having already undergone several rounds of revision, it would undergo further discussion at the central economic working conference in early December before it could be officially released, they said. 

The package suggested upping the proportion of labor remuneration in gross domestic product (GDP) from 39.7% in 2007 to 45%, and working out a detailed pay raise scheme for 2009 before the end of this year.

The package also urged implementation of the new health care reform scheme, which aimed to make medical care affordable for all urban and rural citizens. Officials recently closed a period of public comment for the scheme.

The source said the Chinese government needed to increase public spending to provide better social securities, as only then would people be willing to spend and consume more.

He further advised the government inject RMB 300 billion to 400 bilion to the stock market, which was equivalent to some 10% of the total market value of the Shanghai and Shenzhen stock exchanges, to boost investors' confidence. 

As Chinese stock prices tumbled from last October's new high - 6,200 points - to the present 1,880 points, 70% of Chinese investors' stock market assets had evaporated. 

The key to spur consumption was to increase consumers' confidence and encourage optimistic expectations, the source said.

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