For a while, the Chinese economy was going gangbusters. Then came the world financial crisis. China was not unscathed. Its export, the engine that had been propelling the economy, dropped more than 20%. To save the economy, a huge stimulus of almost 600 billion dollars was quickly implemented. The Chinese stimulus plan was coupled with a number of other fiscal or monetary actions like lowering interests rates, relaxing bank credit, encouraging consumer spending, etc. As reported by world financial institutions like World Bank, International Monetary Fund and the Organization for Economic Cooperation and Development as well as concurred by a majority Chinese economists and business executives, the policy of the stimulus may have boosted China’s GDP in 2009 by 1.5 to 2 percentage points. A rough calculation could translate this stimulus effect to be 40 million jobs created if based on the average wage of Chinese workers. Incidentally but not surprisingly, IMF urges China to continue the economic stimulus.
The stimulated Chinese economy is good news for US export since China trades with the US a lot. Another food for thought: the magnitude of China’s stimulus is enormous (considering China’s economic size is approximately one third of that of the US) and the implementation was swift.