China has also decided on an expensive bailout–spending on infrastructure and aid–in a move that will boost demand for imports. Export demand will also get a boost as export taxes will be reduced.
The plan calls for higher spending through 2010 on airports, highways and other infrastructure, more aid to the poor and farmers, and tax cuts for exporters. That could boost demand for iron ore from Australia and Brazil, factory and construction equipment from the United States and Europe, and industrial components from throughout Asia.
The Chinese plan will cost government 586 billion, a little less than the 700 billion plan in the US. The real difference is that the US bailout goes straight to financial institutions, allowing them to finance loans, possibly boosting investment spending. The China plan is to boost import demand directly and encourage investment and jobs by upgrading infrastructure. Perhaps both were needed in the form they took, but the Chinese plan will certainly have a more immediate influence.