By Adam Child
A RMB 4 trillion (USD 586 billion) Chinese stimulus officially announced back in November is reported to contain as much as USD 450 billion in sustainable spending. Details are sketchy, however, and we advise caution.
First, the proportion of the RMB 4 trillion that may be properly termed discretionary stimulus is uncertain. Beijing will not fund the majority of the stimulus directly, but rather through leaning on state owned enterprises and banks to step up spending and lending. It therefore becomes rather difficult to accurately surmise the total cost. Secondly, identifying the sustainable portion of the stimulus is also problematic. The package was announced as a series of initiatives targeting areas including social housing and slum development, healthcare infrastructure, electrification, water, rural infrastructure and biological conservation. The budget for each area is immense, but finding targeted funding for sustainable projects in this haystack isn’t a simple task.
Nonetheless, too much concern over headline sums is unhelpful. We maintain that the Chinese stimulus, perhaps more than that of any other major G-20 nation, marks a radical step change in the assumed model of national economic development. The fact that many of the proposed projects are ‘shovel ready’ does suggest they may have gone ahead in the absence of stimulus. But this is not the best conclusion to draw. More importantly, it confirms that sustainability is just as much a built-in aspect of policy making for the Chinese as for the Americans or the Europeans. Social disquiet following recent toxicity scandals underlines the necessity for sustainability in China, no less than in the developed economies. Air and water pollution, health scares and food shortages, lack of medical provision and access to education all pose serious challenges to the Chinese establishment. The stimulus demonstrates that this fact is not lost on the leadership in Beijing.
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