Chinese Premier Wen Jiabao is expected to announce additional economic stimulus measures at the opening session of the National People’s Congress on Thursday. The new stimulus would add to the 4 trillion Yuan ($585 billion) stimulus package announced in November last year. According to government insiders the new stimulus measures became necessary as the economy does not show signs of recovery yet. The Shanghai stock exchange main index jumped 6.2 percent on Wednesday after the comments on additional stimulus measures.
China’s official military budget will grow 14.9 percent on last year, according to a government spokesman. This step would bring China’s military budget for 2009 to a total of 480.7 billion Yuan ($70.24 billion), up 62.5 billion Yuan from last year. These numbers are far from the U.S. defence budget for 2009 of $515 billion (not including war spending for Iraq and Afghanistan) but cause considerable concerns among the U.S. and China’s neighbouring countries in Asia. With 6.3 percent of the total national budget, this year’s defence budget continues in the line of almost two decades of double-digit growth in defence spending.
With global commodity prices on a low China Investment Corporation (CIC), a sovereign wealth fund governing $200 billion of China’s foreign exchange reserves, considers foreign mining assets as potential investment targets. With negative experiences in its financial investments due to the economic meltdown and commodity prices on a long term low CIC sees commodity assets as a valuable opportunity for long-term investments.
Bank lending in China is expected to slow down in February after hitting a record high of 1.62 trillion Yuan in January. Government officials expected loans for February to reach 800 billion to 1 trillion Yuan.
Legislature spokesman Li Zhaoxing announced government plans for a tax code reform to spur domestic consumption, exports and transactions in the equity market. The plans include tax cuts for stock market transactions, and domestic consumption as well as export rebates.
The People’s Bank of China (PBC), China’s central bank, announced plans to legalize private lending in rural areas to help ease negative effects of the economic downturn. Over the last two years the Chinese government has issued a range of measures to increase employment and economic activity in rural areas. However, private lending and micro credits have remained in a legal grey zone so far. With the economic slowdown exacerbating the situation in China’s rural areas the PBC now plans to formulate regulations for private lending and develop micro credit lenders into a “significant player” in rural money markets.
