China's economic stimulus: Cannot benefit other nations

[GoFlyKiteNow]

China announced recently that it is spending hundreds of billions of dollars to stimulate its sagging export driven economy to avoid social unrest.

Its economy is expected to grow at a modest 6.9 % for year 2009.

Many economists and Asian political leaders have publicly stated that China will thus provide the growth potential for other Asian nations who are also hit by the current financial crisis.

BUT..there is a big BUT...

China is making sure that all the money from the package is spent internally. All goods and services earmarked in the stimulus package has to be locally sourced and purchased.

Example: The proposed Shanghai Beijing railway project. Everything, all the materials and equipment must be purchased locally. That is the strict condition the project is subjected to under the stimulus package. So are all the other projects coming on stream in China.

That being the case, will anyone explain here, how will China's economic growth fueled by its internal stimulus package ever benefit other nations in the region let alone power the global economy as often claimed by these economic and financial experts and some political leaders, in the media.

Such claims and opinions can logically and rationally be proven to be totally wrong and mere hype. It has no basis at all.

 

[po2wq]

... China is making sure that all the money from the package is spent internally. All goods and services earmarked in the stimulus package has to be locally sourced and purchased. ...

fat water no flow 2 outside ppl's fields ...

 

[longbow]

Given that China is a global manufacturing titan, it is well developed in many of the industries that will gain from the economic stimulus package. After all even if Chinese G gives its citizen a stimulus check (similar to US stimulus check) citizens will go buy a TV, washing machine, laptop computer, hand phone - just like what many Americans did and these are all made in China!

As for rebuilding roads and bridges, the Chinese have huge iron and steel, cement industries. However if you ask Australia and other commodity based economies they will benefit from China's stimulus as they will need a lot more of such.

 

[GoFlyKiteNow]

Given that China is a global manufacturing titan, it is well developed in many of the industries that will gain from the economic stimulus package. After all even if Chinese G gives its citizen a stimulus check (similar to US stimulus check) citizens will go buy a TV, washing machine, laptop computer, hand phone - just like what many Americans did and these are all made in China!

As for rebuilding roads and bridges, the Chinese have huge iron and steel, cement industries. However if you ask Australia and other commodity based economies they will benefit from China's stimulus as they will need a lot more of such.

First and foremost the quantum of the stimulus package itself maybe overblown just as many economists doubt the amount of foreign reserves China claim to hold. Secondly China's demand for commodities upto last year was primarily driven by the need to make and export finished products for the USA and Europe markets.

Now that this export market is not there and therefore the internal demand will be met with internal resources or nothing. As seen now by the large number of factories shut down and jobs lost.

The large Australian mineral company Rio Tinto was forced last week to negotiate a new supply contract with Japan and Korea at 32% below last year prices. Goes to show that the demand for commodity is just not there as people assumed or the market hyped.