Investors welcome Chinese stimulus package

Investors welcomed China’s multibillion stimulus package but analysts said today that Beijing must ensure companies get access to more credit to sustain its effectiveness.

Stock markets in Japan, Hong Kong and mainland China soared following yesterday’s announcement of the €455bn package as China joined moves by governments around the world to cushion the blow of the global slowdown.

The package calls for higher government spending on roads, airports and other infrastructure and bigger subsidies to the poor and farmers. It promises more lending for rural projects, smaller companies and consumers but gives no details.

The plan represents another drastic step away from lending curbs and other anti-inflation measures that Beijing imposed over the past three years but has been rolling back since mid-2008 as government alarm about slowing economic growth mounts.

“It is clear that aggressive fiscal stimulus is necessary to jump start the economy at a time of sharply deteriorating outlook and sentiment,” said UBS Securities economist Tao Wang in a report to clients.

Still, “given the importance of bank financing in China ... increasing bank lending would be critical to sustain corporate investment needs,” he said.

The plan follows an unexpectedly sharp slowdown in economic growth that has raised the prospect of job losses and unrest.

China’s economic growth fell to 9% in the third quarter, its lowest level in five years, and analysts expect export growth to fall as low as zero in coming months as global demand weakens.