No one should have any doubt about China's war chest against the threat of a recession, as a repercussion of the global financial crisis.
The 4 trillion yuan ($585 billion ) stimulus package that Beijing has announced is not an impossible task for a government that, according to economists from official think-tanks, controls between 30 to 40 percent of the nation's GDP (26 trillion yuan in 2007).
Many local governments and corporations all have their own funds to match up whatever potentially lucrative investment projects with approval from the central government.
What remains a question, however, is its guarantee of the good use of the money. "Good" means to keep an effective check on project quality, especially flaws caused by official corruption, and on projects of bad, old perception on environmental, such as those featuring high energy demand and high emission.
To resist the impact of the global crisis is important. By the logic of economics, a New Deal-type program may do the work, as there have been precedents in the world.
But a New Deal should not mean a rush job, even less a hotbed to breed a new generation of corrupt officials.
Reassurance is needed from the national legislature session in 2009, or the National People's Congress, to be held in early March.
A taskforce may be needed on the cabinet level to police some of the largest projects.
At the moment, a special budget of 120 billion yuan (as phase one of the 4 trillion yuan package) is being distributed and spent between now and beginning of March 2009, to generate the badly needed growth and job increases. The central government should act quickly enough to establish a matching supervision mechanism on the project managers and contractors. It is not an easy job to oversee the use of so much money within so short a span of time (4 trillion yuan between now and the end of 2010).
Like many things in the reform, the administration of massive public spendings is still an area where China itself does not have precedents to follow.
In reality it will not be just 4 trillion yuan. For although the stimulus package that Beijing has announced is one to be drawn from the central government and from local governments and corporations, the leverage ratio of the central funds is relatively low, with each yuan expected to trigger the spending of another three yuan or even less.
Now that the central government has switched to giving the green light on fixed-assets investment - something long held under check for fear of triggering higher inflation - many local governments must compete for such a rare window of opportunity. They would appear silly, and even politically incorrect, if they don't.
Right now, as all provinces and municipalities are briefing the media about their stimulus plans, most of the reports are still too sketchy and contain few details.
Cash-rich local governments tend to have very large ambitions. Just a few days after the central government's announcement of the stimulus plan, the municipal government of Beijing declared that, for just this one city, projects have been planned to cost 1 trillion yuan of investment, or one-fourth of the budgeted national total.
Consider the fact that this was only three months after the city hosted the world's most spectacular Olympic Games, dazzling viewers' eyes with some of the largest and most advanced public facilities on earth.
If its investment appetite can still be so high, and if the local officials believe they have ways to somehow get as much as they want to spend, then the amount of money to be spent by the whole nation can be an amount that virtually defies imagination.
Beijing's municipal officials are not alone. From south China's Guangdong province, one of the regional economies that is most deeply hurt by the dwindling consumer demand from China's traditional export markets in North America and Western Europe, the governor pledged more than 2.3 trillion yuan in the next five years.
E-mail: younuo@chinadaily.com.cn
(China Daily 11/24/2008 page4)
