Asia Sentinel, 13 Nov 2008, John Browne
The announcement of China's massive stimulus package of almost US$600 billion shows that the country means business not just in reviving, but also in rejuvenating its economy.
As both America and China confront the prospect of a global depression, both have chosen to fend off potential unrest with liberal government spending. But the Chinese move is bolder and more likely to succeed.
The most remarkable aspect of the Chinese stimulus plan is its enormous size. Despite the massive publicity surrounding its formidable growth rate, the Chinese economy is still ‘only’ one-fifth the size of America’s. Relative to its economy, China’s stimulus package would be the equivalent of a US$3 trillion package in America.
The Bush-Greenspan asset booms were so extreme, and the resulting deleveraging so massive, that government actions in multiples of trillions of dollars are needed to make any meaningful impact in slowing the asset bust.
Based on this yardstick we can see that the differences in the Chinese and American approaches could not be more dramatic. The divergence bodes ill for the future.
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