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Standard Chartered: China's stimulus plan to take effect in Q2

(Xinhua)
Updated: 2009-03-08 11:51

China's 4-trillion-yuan ($586 billion) stimulus package would boost the economy in the second quarter this year, Standard Chartered Bank forecast in its latest research report.

In November 2008 China presented the 4-trillion-yuan fiscal stimulus plan for the next two years to cope with the adverse effects of the global economic downturn.

The key to the stimulus package lies in its driving effect on whether it can stimulate private investment and trigger demands for roads building machinery, power plant, water treatment equipment, said the report released over the weekend.

If the government's public spending could activate demands for upper-stream industries, the economy recovery could come at an earlier date and last longer, according to the report.

Stephen Green, head of research of Standard Chartered Bank in Shanghai, said the Chinese government is able to expand its stimulus package to the tune of larger than 4 trillion yuan, and supporting spending from local governments also carry weight.

A recent survey on 459 companies nationwide conducted by China's Caijing Magazine revealed that most firms, especially those from building material and machinery sectors, were confident that they could benefit from the stimulus plan, with 42 percent of the total believing new orders would be on the rise.

The survey was in line with the country's latest purchasing managers' index (PMI) of the manufacturing sector. Figures from the China Federation of Logistics and Purchasing showed that China's PMI in February rose to 49.0 from 45.3 in January.

The PMI includes a package of indices that measure economic performance. The survey covers purchasing and supply managers of more than 700 local manufacturers.

The index measuring new export orders jumped 9.7 points from January to 43.4, the largest increase since September, representing an improvement in external demand.