China builds itself up with stimulus
China's $586 billion stimulus package will focus on everything from construction to tax reform. Scott Jagow talks to Scott Tong in Shanghai, who says China needs all of this to keep up with its domestic growth.
Workers weld a stand on the roof of a building at the Guanyinqiao Pedestrian Street in Chongqing Municipality, China. (China Photos/Getty Images)
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TEXT OF INTERVIEW
Scott Jagow: If there's one economy that wouldn't seem to need a stimulus package, it would be China. China's GDP is still growing at about 9 percent. What the U.S. wouldn't do for a ninth of that right now. But today, China announced a $586 billion stimulus plan.
Our correspondent in Shanghai, Scott Tong is standing by. Scott, why does China need to stimulate it's economy?
Scott Tong: The thing about China is when it goes down to around 8 percent, that's when the yellow light starts flashing on the dashboard, and the central government officials start worrying about social stability. I mean, it really has to grow that fast to provide that many jobs for all the people moving from the countryside to the cities. So as China has slowed down, they've decided, you know we can't wait any more to hit the gas pedal. We have to do this right now.
Jagow: And what is in this stimulus package?
Tong: Well, what isn't in it, Scott? It has roads and bridges to be built, schools and hospitals, RND, tax reform, subsidies to farms -- this is pushing all the buttons of domestic growth in China. And China needs that, because the export side of the economies around the world have basically fallen off a cliff, because the American consumer has disappeared.
Jagow: Well obviously, China is thinking of itself with this. But what about outsiders -- what about the U.S. and other countries? Are they seeing this as a possible help to the global economy?
Tong: The help would be all of the resource providers who will sell stuff to China to do all this building. Because China doesn't have a lot of resources, so it needs to import oil and gas, steel, iron ore, wood, minerals -- all of those things to keep building out this modern economy of China. So the optimists would say that's what's going to pull much of the world along. Now, China can't save the world, but at the very least it can try to boost investor confidence -- at least, stop it from falling through the floor. And that's what China's arguing.
Jagow: All right, Scott Tong in Shanghai. Thank you.
Tong: Thanks.
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