Announcing a nicely rounded four trillion figure, plus a series of macro-economic policy changes including a reduction in VAT, was a smart tactical move, assuaging growing worries at home that the government was not doing enough in the face of a global slowdown that is rapidly spreading east. Indeed, state media, conceded, “The policy change comes out in time as the global financial crisis begins to affect China's real economy.”

But what does the RMB4 trillion (equivalent to 16 per cent of China’s 2007 economic output) ‘stimulus package’ actually mean? Details of the spending plan are sketchy. The investment programme will run between now and the end of 2010, and will be targeted into key areas, including roads, health, rural infrastructure, railways, airports, low-cost housing, food subsidies, development in western China and rural subsidies. In essence, the areas to where state funding has been mostly channeled in recent years, and to where it would likely have continued to go anyhow.

It remains to be seen, however, just how much of the funding is ‘new’ investment, and how much had previously budgeted, announced – and perhaps even spent. Certainly, the new spending announced for railways and airports has been under consideration for some time.

But in China, this quibbling is deemed irrelevant. The package is promoted as active, rather than responsive, policymaking. State media has asserted the global financial meltdown represents an "a new opportunity" for China to “speed industrial restructuring, introduce advanced technologies and talents from abroad.”

The statement of political and economic intent is clear. "We must implement the measures to ensure fast and stable economic development," said Premier Wen Jiabao on Monday. "They are not only the needs of our own development, but also our biggest contribution to the world."

Keywords : Economy, Investment, Finance, Review

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