China's inland provinces need infrastructure, and Beijing has announced a stimulus package of four trillion yuan (S$889 billion) by 2010. China is extending its railway network, rebuilding earthquake-damaged areas in Sichuan, increasing export tax rebates, lending more to small and medium-sized enterprises and spending more on social welfare systems.
To revive the housing market, it is reducing taxes on housing transactions and unwinding property- tightening measures introduced earlier to counter speculation. For first-time home buyers, the minimum down payment has been reduced from 30 per cent to 20 per cent, and banks are allowed to offer interest rates as low as 70 per cent of the standard lending rates for such mortgages. The demand for residential housing remains strong, and China's construction companies are capable of meeting it.
Personal consumption in China should be encouraged; it is only 35 per cent of gross domestic product (GDP), compared with America's 70 per cent. Beijing is introducing rural land reforms, increasing government funding for low-price housing and basic medical services, and reducing interest rates in order to boost domestic consumption. China is determined to grow by at least 8 per cent, to create enough jobs to sidestep large-scale unemployment and social unrest.
