From "Q&A on China’s Stimulus Package" by Wang Tao, chief China economist, UBS Securities, November 11:
The RMB4 trillion (US$586 billion) cannot be viewed simply as the size of the stimulus, as some of projects have already been planned, and some of the spending will likely be carried out by state-owned enterprises affiliated with the government … We do not expect the government to spend in additional RMB2 trillion a year from its budget and have a deficit of 7% of GDP in 2009. Government investment included in the budget was about 3% of GDP in 2007, and we could see this rise by an additional RMB300-400 billion a year, or 1-1.3% of 2009 GDP. This would not include the tax cuts and transfers, which could be another 0.5% or more GDP. This is what we have incorporated in our 2009 forecast, and is consistent with the announced Q4 08 incremental spending of RMB100 billion (0.34% of GDP), and the size of stimulus in 1998-99 (1.5-1.8% GDP).
From "Global Storm Strikes China and India" by Sherman Chan, Moody’s Economy.com economist, November 14:
China’s attempt to change its export focus from low-end items to high-tech products, which started last year, may have been badly timed. The mainland’s robust trade performance had been mainly fueled by the export of low-end necessities such as textiles and clothing. As the economy advances, the authorities have been keen to develop an expertise in technologically advanced products. However, such items tend to be more sensitive to the global economic cycle and suffer more during tough times. Until the global economy begins to recover, China will likely focus on its specialty. Hence, tech specialists such as Japan and South Korea, which export components to China, will soon derive weaker support from the mainland.
From "China: Decelerated Growth and Accelerated Stimuli" by Frank F.X. Gong, chief economist, J.P. Morgan Securities (Asia Pacific), November 16:
The worry is not how fast governments across the country can start to spend the money, [but whether] overheated investments could emerge after the central government starts to push hard for the investment spree. Provincial and local governments across China have been waiting for years to invest … However, they have been held back by the central government, which just five months ago still worried about inflation and overheating … Now the officials feel it is finally their turn. Meanwhile, there are other concerns, such as the effectiveness and efficiency of these investments. Some wasteful production capacity … may be repackaged as infrastructure investments … leading to oversupply, wasteful spending or corruption, when demand weakens.