Just when you think that the US government stimulus is shaking the globe, you learn that 7000 miles away from D.C., a bigger stimulus will create a seismic shaking to our economy. Beijing government leaders approved a Chinese Stimulus of $586 billion. This is 5 to 7% of the Chinese GDP which puts the U.S. stimulus plans of 2% of the GDP in perspective. In this interconnected world, it is imperative that Americans understand what the China stimulus plan is and what intended and unintended consequences it will have for every single American.
Briefly, the China stimulus plan will increase the fiscal deficit of China by a magnitude of at least 30 times. In 2008, China experienced its first fiscal deficit in recent times of $16.23 billion. The majority of the stimulus plan will be spent on Infrastructure: $219 billion airports and $146 billion on rebuilding Sichuan after last year's earthquake. Rural livelihood and infrastructure projects will be funded to the tune or $58 billion. This is the first time that so much attention will be given to the rural cities and towns. China's soul was stirred by the photos of the devastation in the provinces. I've asked about social unrest, and many strikes are occurring in Southern China as a response to closed factories and migrant workers being sent back home. Stay tuned to this issue as more will develop.
The stimulus plan also includes funding for civil projects, technology advances and industrial restructuring, rural civil projects, the environment and social welfare. The intended consequence of many of these funds will be to continue the tremendous progress of moving people out of abject poverty to an improved way of life. This is good news for the world. The unintended consequence is that China is focused on internal issues and not on increasing its investment outside of the country. We need to encourage the Chinese government and its people to seek investment in the U.S. It is critical to do so to create stabilization and to jointly improve our economy as well as our climate. So, if you do one thing differently as a result of reading this blog, research how we can improve the U.S. as a desirable place for investment. Perhaps, read more about the incredible Chinese. They are not as inscrutable as you would imagine. Their laser focus to change and passion to work, to make money and to educate their young is obvious. Can you play a role?