China’s 4 trillion yuan plan

The world economy is heavily reliant upon China who contributes the most towards global economic growth, and so the relevance of China’s cabinet acting fast by introducing a 4 trillion yuan (£374 billion, $586 billion) deal in order to maintain the economy, is surely a good step.

This intervention has been described by the Chinese government as a fast and both heavy-handed investment that is focused on developing infrastructure and house building until 2010.

A combination of the cash introduction and a loose monetary policy has resulted in stocks, metals and oil all gaining.

The optimism generated by the government investment has rallied stocks whilst copper has gained 8 percent as China’s CSI 300 Index of shares closed up 7.4 percent.

China president Hu Jintao is expected in Washington this weekend to meet with Barack Obama to discuss efforts across the world to revive growth as China has done by pumping in 16 percent of their output back into their economy.

According to International Monetary Fund figures, China accounted for 27 percent of the world’s economic growth, so it is easy to see why Obama has already taken steps to align the US with Asia and promote sustainable economic growth and interventionist measures.

The Chinese central bank has been pro-active in cutting interest rates three times since September and the Governor Zhou Xiaochuan has indicated that further rate cuts may be on the way.

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