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Can Urban Stimulus Spark China's Slowing Economy

A series of massive urban stimulus plans have been announced recently by several Chinese cities. Economists are split on whether the projects can speed up the country's growth rate and accommodate the influx of urban migrants, reports Chris Oliver.
August 24, 2012, 6am PDT | Jonathan Nettler | @nettsj
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With China's economic growth rate falling to its slowest pace since the 2008 global crisis, and more deceleration predicted, several local Chinese governments have announced stimulus packages in the hundreds of billions of dollars in recent weeks. The latest came out of the port city of Tianjin, who announced "plans to invest 1.5 trillion yuan ($236 billion) to offset its slowing growth rates," writes Oliver. "The four-year plan is targeted at 10 industries ranging from petrochemicals to ports."

"The announcement comes on the heels of similar stimulus packages in the major metropolis of Chongqing and the southeast province of Guangdong, which unveiled plans to spend 1.5 trillion yuan and 1 trillion yuan, respectively. Big stimulus packages were also unveiled by other Chinese cities in recent weeks, including Wuhan, Ningbo and Guizhou, according to state media."

While some economists see the plans, which effectively repeat the government's initial response to global economic recession, as the right medicine, other are not convinced. 

"Standard & Poor's said Wednesday that massive public spending might boost growth rates in the short term, but it's not clear such stimulus would bring about longer-term benefits to the Chinese economy," writes Oliver.

"It highlighted concerns over the efficiency of some projects, adding that wasteful investment could even have a toxic effect down the road."


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Published on Wednesday, August 22, 2012 in The Wall Street Journal
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