How China and Singapore coping with current recession

China unveiled a multi-trillion yuan economic stimulus plan Sunday aimed at boosting domestic consumer demand in the face of flagging exports, as foreign markets contract in the global financial crisis and would increase spending on infrastructure and a range of other sectors amid slowing domestic growth.

"China has decided to adopt an active fiscal policy and moderately easy monetary policies to foster fast but steady economic growth by expanding domestic demand," said a statement posted on the Cabinet's website.

The spending package would total four trillion yuan (US$586 billion) by the end of 2010, including monies already earmarked this year, it said.

The measures come amid slackening overseas demand for China's manufactured goods -- the mainstay of the Chinese economy -- and the statement
Economic growth in the country eased to nine per cent in the third quarter of this year, the lowest in around five years, partly due to slowing exports.

The central bank has already cut interest rates three times since September and taken other steps to loosen monetary policy.

Those measures marked an about-face from a policy of steadily raising interest rates to cool the economy amid growing inflation and fears of overheating.

The Cabinet, or State Council, also recently approved a plan to spend two trillion yuan on construction of new railways from now until 2020.

The new approach mirrors similar policy steps taken between 1998 and 2004 to cope with the effects of the 1997-98 Asian financial crisis.

Those measures included issuing large amounts of treasury bonds and ramping up public investment.

"The economic situation China is facing now is far more grave than in 1998. There could be more coordination with other central banks as China is more exposed to the external environment," Xing Ziqiang, a Beijing-based economist with China International Capital Corp Ltd, told AFP.

"In 1998, it was mainly Asian countries, including some competitors of China, that ran into trouble. But this time it's China's export market -- America and Europe."

The new spending will be directed at a broad range of areas including the construction of railroads, highways and airports, boosting the services sector and agriculture, and upgrading power grids, the state-run broadcaster CCTV said.

Money also would be poured into social welfare systems including education and public health, it said.

The slowdown is raising fears that millions of factory workers could be left jobless and could confound China's plans to spread economic development from the prosperous coastal manufacturing areas into poor interior regions.

Over in Singapore, Minister Mentor Lee Kuan Yew has said the current global recession is the most severe since the Great Depression of the 1930s. And he cautioned that it is just the beginning in Singapore.

But Mr Lee said: "Our reserves can see us through this crisis without going broke, although we have no natural resources, no oil, gas, palm oil whatever."

Mr Lee also gave the assurance that the government will ensure nobody falls below the poverty line.

It's perhaps an anomaly in the current times that public housing prices in Singapore have remained steady. But, Mr Lee said, unlike the housing crisis in the US, few citizens in Singapore have bought homes they cannot afford.

Singapore's property market is one example pointing to the country's strong economy. Other bright sparks - jobs available at the upcoming integrated resorts and continued investments by high-end manufacturing companies.

Mr Lee said the government will also prime the economy to prepare for tough times ahead.

But here's a reality check - it will be some time before Singaporeans will enjoy the same standard of living they experienced before the crisis.
Mr Lee said: "We cannot restore people (people's living standards) to what they were enjoying before the worldwide crash. But we will make sure nobody falls below the poverty line.

"After studying the situation carefully, ministers have to make a realistic estimate of how much we can afford in additional U-Save, Workfare and other alleviating measures.

"But again, it depends on our assessment of how long and how deep this recession will be."

Mr Lee said that no one knows how long the current downturn will last. His advice to Singaporeans is that they have to accept that sacrifices and cutbacks will have to be made.