Beijing announced its biggest interest rate cut in 11 years on Wednesday to boost consumer and company spending, reflecting its growing urgency about reviving growth as it launches a multibillion-dollar stimulus package.
"This crisis is spreading all over the world and its impact on China's economy is deepening," Zhang Ping, chairman of the Cabinet's National Development and Reform Commission, said at a news conference. He said economic indicators for November were showing an "even faster decline," though he gave no details.
China's economic growth is expected to fall to about 9 percent this year, down from last year's 11.9 percent. That would be the fastest of any major economy, but Chinese leaders worry about possible unrest as unemployment rises, especially in export industries where factories are shutting down as global demand plummets.
"Excessive production halts and closing of enterprises will cause massive unemployment, which will lead to instability," Zhang said.
The 1.08 percentage-point cut in China's key one-year lending rate on Wednesday -- China's biggest rate cut since 1997 and the fourth in three months -- is "one of the essential measures to stimulate our economic growth," Zhang said.
Zhang said the 4 trillion yuan ($586 billion), two-year stimulus package announced Nov. 9 should add about 1 percentage point to China's growth rate. That was below the 2 percentage point increase forecast by independent analysts.
Zhang said Beijing will take steps to boost growth and ensure the economy continues to create jobs. But he did not respond to a question about whether Beijing is planning to enact additional stimulus plans.
A state newspaper reported last weekend that Zhang's agency is working on an additional stimulus package that is meant to supplement the Nov. 9 package with more spending on health, education and other social programs.
The main stimulus package calls for insulating China from the global downturn by injecting money into the economy through higher spending on construction of airports, highways and other projects. It is meant to spur domestic consumption.
The cut in the one-year lending rate to 5.58 percent, effective Thursday, is aimed at encouraging consumers and businesses to borrow and spend, which is seen as a more effective way to fuel growth than government spending.
The stimulus package includes 1.8 trillion yuan ($263 billion) in spending on airports, highways and other, 370 billion yuan ($54 billion) to improve infrastructure in the poor countryside and 350 billion ($51 billion) for environmental projects, according to Zhang.
It also includes 280 billion yuan ($41 billion) for construction of low-income housing and 40 billion yuan ($5.8 billion) for health and education programs, Zhang said.
Zhang said the government is working on how local governments will pay for their share of the stimulus spending. The central government is to supply 1.2 trillion yuan ($175 billion) of the total stimulus spending, with the rest coming from lower-level governments and state companies.
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