China plans another stimulus, but it won't say how much

BEIJING — Premier Wen Jiabao Thursday said China will "significantly increase" spending to counter the effects of a global recession dragging down its export-based economy, but he didn't say how large the new stimulus package would be.

"The global financial crisis continues to spread and get worse," Wen said in an opening speech to the National People's Congress, a largely ceremonial body.

Wen said that global forces could threaten to derail the steady rise of China, which is the world's third-largest economy but is now experiencing its slowest growth in two decades.

"Uncertainties have increased significantly," he said, due to shrinking global demand for Chinese produces and resurgent trade protectionism around the globe.

China will "take reversing the downward trend" in its growth rate as its top goal, Wen said. The continuous drop in economic expansion has become "a major problem," he added, exerting "severe pressure" on employment.

Some 20 million migrant workers have lost their jobs in recent months as factories slow down in the once-vibrant Yangtze and Pearl River delta manufacturing regions, stoking fears of potential social unrest.

Wen said the government expects to create 9 million new urban jobs this year.

Shanghai's stock markets, which surged 6.1 percent Wednesday on hopes for a stimulus package, climbed another 1 percent in early trading Thursday as Wen made his speech.

Nearly four months ago, China announced in a first stimulus package that it would pour $585 billion into the economy over two years.

"We will significantly increase government spending. This is the most active, direct and efficient way we can expand domestic demand," Wen told the nearly 3,000 delegates.

Though Wen didn't specify a figure, he said the spending would help China achieve its target of 8 percent economic growth this year, down from 9 percent in 2008 and 13 percent a year earlier, he said.

"In China, a developing country with a population of 1.3 billion, maintaining a certain growth rate for the economy is essential for expanding employment . . . and ensuring social stability," Wen said.

Hours earlier, a spokesman for the assembly, Li Zhaoxing, described symbolic cutbacks that China's leaders would make, eager to be seen as responsive to the economic pain migrant workers are feeling.

"When our president . . . and prime minister invite foreign heads of state, during the state banquet the menu will not exceed one soup and three dishes," Li said. "No Chinese liquor will be served."

Li announced that China will boost its military spending by a "modest" 14.9 percent this year, marking the 19th time in the past two decades that the annual defense budget has risen by double digits.

Li, a former foreign minister, said that the increase in the defense budget would go primarily to boost salaries, provide training in counterterrorism and disaster relief and increase the digital capabilities of the People's Liberation Army, the world's biggest military.

"China's limited military force is mainly to protect our sovereignty and would not threaten any country," Li said, adding that the budget increase was "modest" when compared with last year, when the defense budget rose 17.6 percent.

In a policy report earlier this year, China said that the army needed to be prepared to protect the nation's growing interests around the globe and deal with new types of conflicts brought about by increased competition for food and oil supplies.

The U.S., Japan and their allies have complained that China's motives in steadily boosting defense spending haven't been clear, causing them some concern about the nation's strategic intentions and generating fears that it may spur a regional arms race.

China's declared defense budget of $70.2 billion is about a seventh of the $515 billion that the U.S. government has budgeted for the Pentagon in the 2009 fiscal year. That amount doesn't include large outlays for the wars in Iraq and Afghanistan, which are financed separately.


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