China Should Have Offered a $1 Trillion Stimulus Package

With the U.S. presenting $750B bailout package, the P.R.C. should have upped the ante beyond $586B to $1T and secure its place amongst world financial leaders. This number, although only $414B more than what was offered, would have made a strong impression on investors and importers around the world. It also would have said that China was going to stand behind its exports and ensure that any global meltdown will not be at the hands of the Chinese.

 

This is important for two because of two facts:

1)     China is the world’s largest consumer of natural resources

2)     China is the world’s 2nd largest exporter of goods

 

Even if China really does not care much about the rest of the world, increasing their bailout would secure their own interests. Domestic Chinese companies need the natural resources to produce their products and run their operations. If these companies have to scale back their operations then china’s domestic economy will sour. Most of these companies export between 70%-95% of their manufactured goods to the U.S. and other nations so China also has a vested interest in making the global economy stronger and more stable.

 

Despite what the world thinks about China’s development, if you look at the infrastructure, poverty level or quality of living for its residents, and the state of healthcare facilities, they are way behind developed nations like U.S., Germany and U.K. China needs to maintain a yearly growth of at least 8% for the next ten years in order to complete the transformation from Communist backwater to Pseudo-Democratic world leader. Unlike China, Japan is not taking any chances and has pledged to the IMF a record amount of $106B worth of aid if needed. They have been through a very rough financial crisis in the early 90s and they are not looking to repeat their mistakes. China easily dwarfs Japan’s $997B in Forex reserves with $2T reported back in September. (to place this in context, the U.S. has only $73B in Forex reserves)

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