China launched a huge stimulus plan last night worth nearly €453 billion starting what may be a round of big spending or interest rate cuts by leading economies to stave off a recession in many countries.
China's official Xinhua news agency said the world's fourth-largest economy approved 4 trillion yuan in new government spending between now and 2010, focused largely on infrastructure and social projects.
The move sent global stock markets soaring with the Dublin market up 4.6 per cent this morning. Earlier Japan's Nikkei closed up 5.8 per cent.
It was also hailed by the head of the International Monetary Fund, Dominique Strauss-Kahn, who said it would have a positive effect on the world economy.
China's cabinet also announced a shift to a "moderately easy" monetary policy, suggesting more rate cuts.
"Easy monetary policy could mean, quantitively speaking, more money supply and a looser market liquidity," the head of China's central bank, Zhou Xiaochuan, told reporters in Brazil.
"It can also be reflected in prices, for example the bank lending interest rate could become lower." China has cut rate cuts three times since mid-September.
"This is pretty major," said Arthur Kroeber, head of Dragonomics, a Beijing economic consultant. "It reflects the official view of how serious this problem is and shows that this is a government that can mobilize enormous resources to stimulate the economy when they put their minds to it."
By comparison, the United States sent out about $100 billion in tax rebate checks this summer, while Germany last week agreed to a €50 billion pump-priming plan.
China's Zhou, attending the meetings in Brazil, said on Saturday the Asian export powerhouse, which is one of the few remaining engines of global growth, expected growth of between 8 per cent and 9 per cent in 2009.
Some economists have predicted growth in China could slow to less than 8 per cent in 2009, down from double-digit levels in the past five years until this year.
Also last night, Taiwan's central bank unexpectedly cut interest rates by 25 basis points, its fourth reduction in just over a month on recession fears for its export-led economy.
In the United States, which is heading for a bleak 2009, senior aides to President-elect Barack Obama said the crisis would not stop him from expanding health care, overhauling education and energy policy, and passing a middle-class tax cut soon after he takes office in January.
Reuters