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Capital Markets

China: Stimulus splits analysts

News that China’s National Development and Reform Commission is considering a new stimulus package in addition to the Rmb4 trillion ($586 billion) plan announced on November 9 will bring cheer to investors and analysts who regard the country’s growth as central to the prospects of an Asian, or indeed global, recovery from the present crisis.

The new plan, widely discussed in the Chinese media but not formally announced at the time of going to press, would focus on promoting domestic consumption rather than infrastructure development.

Details of this new plan, including the likely total to be spent, remain unclear but both this package and the previously announced infrastructure spending are being closely monitored because the health of the Chinese economy is seen as vital to the global battle against recession. Yiping Huan and Ken Peng, analysts at Citi, summarize this view in a note published on November 24. "The rationale for [the new stimulus package] seems clear – the policymakers hope to provide stronger support to consumption," they write.

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