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China’s central and local governments plans 12.6 trillion RMB (Over US$2 trillion) in spending

Wednesday, September 12, 2012 0:52

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From NextBigFuture.com

Forbes – Weak economic data from the world’s second largest economy continues to stoke fears that as China slows down, it will exacerbate the cooling of the global economy. But it shouldn’t be all gloom and doom, according to Nomura’s economic research team, which suggests Chinese output will rebound sharply in the fourth quarter on the back of a stimulus plan worth about one trillion RMB ($158 billion) and monetary easing by the People’s Bank of China.

While GDP is expected to grow only 7.7% in the third quarter, Nomura’s research team forecasts a sharp rebound in the fourth quarter, with output expanding 8.8%. Infrastructure investment will play a prominent role in this recovery. Total planned investment for new projects started in August rose 33% year-over-year in August, up from 25% in the previous month; it’s forecasted to grow more than 40% this year.

Power stations, wind farms, airports, water supply, sewage treatment, and waste incineration power plant projects have also been announced, worth together around one trillion RMB, Nomura’s estimates show, or 2.1% of GDP. These projects take an average of four years to complete, and are normally started with a three to four month lag, they explained.

Local governments have also pledged about 11.6 trillion RMB in development projects that last anywhere from three to five years to complete. That translates into $1.83 trillion or 23% of GDP, dwarfing the four trillion RMB 2008 fiscal stimulus. While it isn’t entirely clear that these projects will indeed go through in the long run, Nomura expects investments in several of these to pick up over the coming months.

China's local government and central government infrastructure and development projects are going to be about US$2 trillion over four years.

The United States has an eleven month budget deficit of 1.17 trillion. The United States will likely have another $4 trillion in new deficit spending for the next four years.