BEIJING – China unveiled a $586 billion stimulus package Sunday in its biggest move to inoculate the world's fourth-largest economy against the global financial crisis.
Chinese and Japanese stocks soared Monday in early trading after the government's announcement. The Cabinet approved the plan to invest money in infrastructure and social welfare by the end of 2010, a statement on the government's Web site said.
Some of the money will come from the private sector. The statement did not say how much of the spending is on new projects and how much is for ventures already in the pipeline that will be speeded up.
China's export-driven economy is starting to feel the pinch of weakening U.S. and European economies, and the government has already cut key interest rates three times in less than two months in a bid to spur economic expansion.
Economic growth slowed to 9 percent in the third quarter, the lowest level in five years and a sharp decline from last year's 11.9 percent.
That is considered dangerously slow for a government that needs to create jobs for millions of new workers who enter the economy every year and to satisfy a public that has come to expect steadily rising incomes.
Exports have been growing at an annual rate of more than 20 percent but analysts expect that may fall as low as zero in coming months as global demand weakens.
The International Monetary Fund has urged governments to adopt economic stimulus packages and, in some cases, to cut interest rates further, to counteract the slowdown.
China joins other major economies such as the U.S., Japan and Germany which have already introduced their own stimulus plans.
The U.S. allocated $168 billion earlier this year for tax rebates to individuals and tax breaks for businesses. Germany set aside $29 billion for tax breaks on new cars and credit assistance for companies. Japan allotted $275 billion for loans to small- and mid-sized businesses and discounts on highway tolls among other measures.
On Wednesday, finance officials from the G-20 group of major wealthy and developing nations convene in Washington to discuss a strategy for strengthening the global economy. Chinese President Hu Jintao is expected to attend.
China's statement said the Cabinet, at a meeting chaired by Premier Wen Jiabao, had "decided to adopt active fiscal policy and moderately easy monetary policies."
The statement said the spending would focus on 10 areas. They included picking up the pace of spending on low-cost housing — an urgent need in many parts of the country — as well as increased spending on rural infrastructure.
Money will also be poured into new railways, roads and airports. Spending on health and education will be increased, as well as on environmental protection and technology.
Spending on rebuilding disaster areas, such as Sichuan province where 70,000 people were killed and millions left homeless by a massive earthquake in May, will also be accelerated. That includes $2.93 billion planned for next year that will be moved up to the fourth quarter of this year.
The statement said rural and urban incomes would be increased.
Credit limits for commercial banks will also be removed to channel more lending to priority projects and rural development, it said.
Reform of the value-added tax system will cut taxes by $17.5 billion for enterprises, the statement said.