Some stimulating news from Beijing. While you were chilling out this weekend, Chinese officials were working overtime to wrap up a US$586 billion stimulus package to boost the country’s economy. During the next two years, a lot of that money will go to infrastructure and social welfare projects. Some companies will enjoy another government boost – value-added tax reforms that could cut their costs by US$17.5 billion.
Lenovo’s profits could use a stimulus. The Chinese computer maker saw its quarterly profit fall 78% year-on-year to US$23.4 million. PC unit shipments for the company’s fiscal second quarter rose, but not as fast as the industry’s growth rate as rising sales in Greater China and Europe failed to offset a 4% decline in the American market.
And Rio Tinto has been stimulated to cut output at its mines in Western Australia by 10% due to reduced demand for iron ore from China’s steelmakers. Last week, Rio Tinto CEO Tom Albanese said China’s economic slowdown is getting worse, but he expects it to rebound next year.
Meanwhile, China’s President Hu Jintao would like to stimulate US President-elect Barack Obama into reading the Ernest Hemingway novel “A Farewell to Arms.” The two chatted by phone, no doubt taking advantage of those low weekend rates. The Chinese leader repeated a refrain that’s a best-seller in Beijing: Don’t stimulate Taiwan’s military by selling it weapons.