When people hear you’ve come into some money, there is no shortage of suggestions on how to spend it. We now know who gets what from the US$586 billion stimulus package and the first portion, totaling US$14.65 billion, will be spent by local governments. We can safely assume a chunk of this cash will go toward supporting small and medium-sized enterprises, after Premier Wen Jiabao basically told local governments this is what they would be doing.
The UN Development Program has also weighed in, saying more should spent on improving education, health, social security and employment services in rural areas. Farmers can expect about a third of the US$586 billion pot, but obviously the UN is concerned about the fine details. While soft spending is good – indeed, many see it as the foundation for sustainable growth in China – a quarter of the stimulus package will be spent on transport infrastructure. Let’s hope it signals the end of shoddy work and substandard materials in the building industry. An under-construction subway tunnel collapsed in Hangzhou over the weekend, killing at least three workers while 17 more are still missing.
With a rising bill at home, China appears keen to limit its expenditure abroad. Beijing’s delegates were reticent at the world financial summit in Washington as to whether China would help bail out those countries most heavily hit by the economic crisis. Nevertheless, China’s sovereign wealth fund is apparently back in the game for a stake in Australian iron ore producer Fortescue Metals. The government will also spend US$440 million to help out ailing domestic airlines.