WHILE THE U.S. AND EUROPE SCRAMBLE to bail out their banks, China has a different approach to stimulus.
Unlike New York or London banks, China's largely isolated lenders aren't in dire straits. But faced with slowing exports and rising unemployment, Beijing last November moved to inject both confidence and cash into its flagging economy -- at least 4 trillion yuan ($585 billion; one yuan is worth around U.S. 15 cents) during 2009 -- with a promise to dip further into the country's $2 trillion in foreign reserves if necessary in the future.
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The key words here are "infrastructure investment." From China's stimulus package, 600 billion yuan will be pumped into new rail services this year, 70% of it earmarked for high-speed passenger lines. That's almost double the 330-billion-yuan 2008 budget for rail, and solid jumping off place for 2010's 700 billion yuan.
Around 250 Chinese cities are planning to build new subway lines by 2015; the city of Changshang in central China alone is investing 22.4 billion yuan in two new subway lines.And this is just the start. As Andy Rothman, China macro strategist at brokerage CLSA in Shanghai, notes: "This is a political exercise as much as anything, and there are no constraints, so
can spend as much money as possible to get the economy going again." If nothing else, the package has helped boost the Shanghai Composite, an index of all mainland-listed stocks, by 14% on the year to March 3.
<snip> http://online.barrons.com/article/SB123638324852357879.html
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