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Spending details revealed for economic stimulus package

CHINA will spend 3 trillion yuan (US$439 billion) on infrastructure projects and improving the livelihoods of its citizens and 1 trillion yuan on rebuilding earthquake-hit regions, the country's top planning body said yesterday as it provided details on the nation's massive economic stimulus plan.

The government will decide whether China needs to spend even more to offset the effects of the global economic downturn after studying the results of the initial 4-trillion-yuan package, Zhang Ping, minister of the National Development and Reform Commission, told a press conference during the ongoing annual session of the National People's Congress in Beijing.

The money will go to seven key areas: 1.5 trillion yuan for infrastructure, 1 trillion yuan for reconstructing the areas damaged in last May's Sichuan earthquake, 400 billion yuan for affordable-housing projects, 370 billion yuan on improving rural living standards, 370 billion yuan for technology upgrades, 210 billion yuan for energy-saving efforts and 150 billion yuan for health and education.

The central government will provide 1.18 trillion yuan of the total, and the rest will come from local governments, policy loans and corporate bonds, Zhang said.

Chinese firms have generated 130 billion yuan since the fourth quarter of last year by issuing 45 bonds, and another 50 companies have lined up for regulatory approval to sell a combined 100 billion yuan in corporate bonds.

"The funds will be spent on road and power grid construction projects that will produce future returns," Zhang said.

The State Council will also allow local governments to issue 200 billion yuan worth of government bonds through the Ministry of Finance. The proceeds of those bonds will go into provincial budgets.

The NDRC, the Ministry of Finance, the central bank and the banking regulator have worked out a plan to grant policy-related loans with a longer maturity and lower interest rates to fund some of the stimulus projects.

"We also welcome public investment into profitable areas such as railways and technology innovation," he said.

China's economy cooled to a seven-year low of 9 percent last year and broke a five-year streak of double-digit expansion. In the last quarter, growth fell to 6.8 percent, the lowest in nine years.

Premier Wen Jiabao said earlier that the country will implement a "proactive fiscal policy" and "moderately easy monetary policy" to achieve its goal of 8 percent economic growth this year.

China acted quickly to ease its monetary policy, and that strategy is beginning to bear fruit, central bank Governor Zhou Xiaochuan said at the same press conference yesterday.

"We would rather act faster and take more forceful measures" to shore up confidence "as long as the measures can check the slide in confidence and spur fast recovery of the economy amid the crisis," he said. "The economic indicators are showing signs of stabilizing and recovering and have demonstrated that the policies are beginning to take effect."

Zhang also noted "signs of recovery," including a rebound in consumption, investment and some product prices.

In addition, economists have pointed to expanding credit as a mostly positive signal.

Financial institutions in China extended a record 1.62 trillion yuan in domestic-currency-denominated loans in January. At the same time, M2, a common measure of money supply, climbed 18.8 percent from a year ago, topping the central government's 17 percent annual target.

Central bank Governor Zhou said China still has enough room to fine-tune the credit volume this year though he admitted the January explosion outstripped expectations.

Analysts expect the February figure, which is due to be posted next week, will hover around 1 trillion yuan.

The strong credit growth in China has been unusual, given that many Western countries have been unsuccessful in thawing loan expansion.


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