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China plans 10 major steps to spark growth

2008/11/10

China will take 10 major steps to stimulate domestic consumption and growth as it turns to an "active" fiscal policy and "moderately easy" monetary policy, an executive meeting of the State Council said on Sunday.

Here are the 10 major steps:

-- Housing: Building more affordable and low-rent housing and speeding the clearing of slums. A pilot program to rebuild rural housing will expand. Nomads will be encouraged to settle down.

-- Rural infrastructure: Speeding up rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure drinking water safety. This part of the plan also involves expediting the North-South water diversion project. Risky reservoirs will be reinforced. Water conservation in large-scale irrigation areas will be strengthened. Poverty relief efforts will be increased.

-- Transportation: Accelerating the expansion of the transport network. That includes more dedicated passenger rail links and coal routes. Trunk railways will be extended and more airports will be built in western areas. Urban power grids will be upgraded.

-- Health and education: Beefing up the health and medical service by improving the grass roots medical system. Accelerating the development of the cultural and education sectors and junior high school construction in rural western and central areas. More special education and cultural facilities.

-- Environment: Improving environmental protection by enhancing the construction of sewage and rubbish treatment facilities and preventing water pollution in key areas. Accelerating green belt and natural forest planting programs. Increasing support for energy conservation and pollution-control projects.

-- Industry: Enhancing innovation and industrial restructuring and supporting the development of the high-tech and service industries.

-- Disaster rebuilding: Speeding reconstruction in the areas hit by the May 12 earthquake.

-- Incomes: Raising average incomes in rural and urban areas. Raising next year's minimum grain purchase and farm subsidies. Increasing subsidies for low-income urban residents. Increasing pension funds for enterprise employees and allowances for those receiving special services.

-- Taxes: Extending reforms in value-added tax rules to all industries, which could cut the tax corporate burden by 120 billion yuan (about 17.6 billion U.S. dollars). Technological upgrading will be encouraged.

-- Finance: Enhancing financial support to maintain economic growth. Removing loan quotas on commercial lenders. Appropriately increasing bank credit for priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.

These 10 moves are expected to have positive effects on cement, iron and steel producers amid a boom in infrastructure investment. Commercial lenders will benefit as loan ceilings are abolished, and medium-sized and small companies are likely to benefit from preferential policies. 

Related story:

China's 4 trillion yuan stimulus to boost economy, domestic demand

China said on Sunday it will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.

This is a shift long advocated by analysts of the Chinese economy and by some within the government. It comes amid indications that economic growth, exports and various industries are slowing.

A stimulus package estimated at 4 trillion yuan (about 570 billion U.S. dollars) will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake.

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