Thursday, March 5, 2009

Sorry Jack, no plum in your Chinese pie today

"Wen told the National People's Congress that government spending would increase by a quarter to hit the target of 8% growth. However he stopped short of a pledge to boost the country's 4tn yuan (£4bn) stimulus package.

Stockmarkets rose yesterday amid speculation that such an announcement would be made, and many fell back today after it became clear that no new package was forthcoming. The FTSE 100 dropped 63 points, or 1.75%, this morning.

The boost in expenditure will see the Chinese deficit balloon to its highest level in 60 years, from 0.4% of national income last year to 3% this year. But the 950bn yuan deficit is still small in comparison to other countries, such as the US, where the deficit is more than 12% of income."

Note Chinese governments intention to increase spending by 24% in order to meet it's growth projections.

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