China’s version of the stimulus package

The World

MARCO WERMAN: I’m Marco Werman. This is The World. President Obama says the nation’s economy is at a perilous moment, and he urged swift and decisive action on the $800 billion-dollar stimulus plan that’s winding its way through Congress.

PRESIDENT OBAMA: This recovery plan will include unprecedented measures that will allow the American people to hold my Administration accountable. Instead of just throwing money at our problems, we will try something new in Washington: we will invest in what works.

WERMAN: While President Obama struggles to get that stimulus package approved, China’s leaders are steaming ahead with theirs. Beijing’s already earmarked about $585 billion for projects like railways and roads to create jobs, and the government is trying to get China’s 700 million rural people to spend more. It’s offering them subsidies to buy big household appliances. The hope is that getting those Chinese shopping will make up for sagging exports to the U.S. and other countries. In Sichuan province, The World’s Mary Kay Magistad found it’s not that easy getting Chinese peasants to part with their money.

MARY KAY MAGISTAD: Li-Jong-Bao is the kind of small town where farmers in threadbare clothes come with straw baskets strapped onto their backs to sell vegetables from their fields, and to get supplies before they start the trek back home. The Chinese government is trying to get these kinds of farmers all around the country to spend more — to buy televisions, air conditioners, washing machines and refrigerators. If they do, they will get a 13 percent rebate. That rebate used to go to exporters, but now that China’s export market has taken a hit from the global economic slowdown, it is going to stimulate domestic demand. The program goes national on Sunday. It’s already been in place here in Sichuan province as a pilot project for two years, and people have been buying. A migrant worker named Lien, who is home for the Chinese New Year’s holiday, says she bought a television and a washing machine under the program, and while she would have bought the TV anyway, the discount persuaded her to buy the washing machine. There’s a little appliance store nearby selling TVs and refrigerators and washing machines. The manager says the rebate policy helped boost her sales by 20 percent or more last year. That was before people around here started feeling the effects of the economic slowdown. Now, she says, they just come in, look at the prices, and leave. There are still some sales, but she says she’s started letting farmers buy now and pay later. One farmer comes in as we’re chatting and gives her a wad of bills. But, the manager says, she’s having to wait longer now for such payments because most farmers get their money from family members who have become migrant workers ? and many migrant workers from this area have lost their jobs. That’s one problem for this domestic spending stimulus program. Economist Jua Du-Ming, at Beijing University’s China Center for Economic Research, says another is that most Chinese have other spending priorities.

JUA DU-MING: Pays for your retirement, healthcare, education. Those were the three major categories when we talk about domestic consumption demand. ?Cause when you have all these things at least been taken care of, then people will have more, exactly, to spend, when people nowadays, they’re really scared.

MAGISTAD: That’s because most Chinese don’t have health insurance, can’t move their pensions from one province to another if they change jobs, and have huge bills to pay from their kids education from high school on.

MING: The current economic crisis has really changed a lot of things. I can see that the Central government is ? they are indeed trying to solve our problems, but all the conflict of interest is there. But when the general macroeconomic has shed in such a way that they had to do something.

MAGISTAD: But the change isn’t coming soon enough for farmer Sur-Wen-Cho. Certainly not fast enough to make her buy appliances anytime soon. She’s now living with her son. She says before she buys any appliances, she wants her own roof back over her head. She also wants reassurance that if another catastrophe comes, the government will help. The good news is China now seems on the road toward giving farmers like Sur-Wen-Cho what they need to feel secure and to spend more. The bad news is, the road is long and the journey hard. That means Chinese consumers aren’t likely to make up for the losses from foreign markets anytime soon. For The World, I’m Mary Kay Magistad, Li-Jong-Bao , Sichuan province, China.

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