- A comparison of 10 different stimulus spending categories shows that the largest portion of the US stimulus (27.1%) is going toward tax relief, while the China stimulus is weighted toward infrastructure development (37.5%). The US is spending 16.0% of the stimulus on education and training, whereas China is only spending 1.3%; however, a significant portion of the China stimulus is targeted at rural development and post quake reconstruction (34.3%).
- China and the US agree on the importance of Technology and Sustainable Development with both countries allocating significant portions toward promoting technology sectors, representing 14.6% and 16.3% of their respective packages.
- Both stimulus plans are predicted to have great impact on the global economic recovery by supporting international trade – calculations estimate the US stimulus will drive $274.9 billion in imports, and China’s stimulus will drive $298.0 billion in imports.
- Funds have been allocated, but the majority of the stimulus dollars have not yet been spent in either country, so the impact must be predicted by other signs such as consumer confidence, which has increased to 69.4 in the US for October, an improvement from the low of 55.3 in November 2008. In China the IMF maintains a positive outlook, projecting China’s GDP will grow at 8.5% in 2009.
“For the United States and most of the world, the financial crisis has overwhelmingly been a disaster, and has required emergency measures by governments around the world to prevent economic collapse. For China, however, the crisis has been more akin to an opportunity,” said Steven Lee, head of investment research and analytics at SmithStreetSolutions. “SmithStreet’s research has shown a clear delineation between the stimulus approaches of the US and China, with the US stimulus focused on emergency measures to shore up the financial system and promote domestic consumption, versus China’s stimulus which is driven by infrastructure development and long term growth of the economy.”
The US stimulus package focuses on reigniting domestic consumption, while China’s stimulus package takes a longer-term approach of Government-led infrastructure development. The whitepaper’s side by side analysis of the two stimulus plans is broken down into 10 categories including: Protecting the Vulnerable, Education and Trading, Healthcare, Energy and Sustainable Development, Infrastructure, Science and Technology Advancement, Other Social Programs, Tax Relief and Other, Post Quake Reconstruction and Rural Development.
