China launches $600 billion stimulus plan

China moves to boost economy, G20 sees more action

By Kirby Chien and Anna Willard Kirby Chien And Anna Willard – 1 hr 34 mins ago

BEIJING/SAO PAULO (Reuters) – China launched a huge stimulus plan on Sunday worth nearly $600 billion, kicking off what could be a round of big spending or interest rate cuts by leading economies to stave off a recession in many countries.

In Brazil, finance ministers and central bank governors representing 90 percent of the world's economy said they would take "all necessary measures" to get financial markets back to normal and counter the backlash of the credit crisis.

Many developed economies are now facing a contraction next year after lending from banks suddenly dried up, and newer powers such as China have been caught up in the domino effect.

World leaders meet next weekend to discuss precisely what measures they need to work out in coming months, and how much more say emerging economies will have over global finance.

China's official Xinhua news agency said the world's fourth-largest economy approved 4 trillion yuan ($586 billion) in new government spending between now and 2010, focused largely on infrastructure and social projects.

The move was hailed by the head of the International Monetary Fund, Dominique Strauss-Kahn, who said it would have a positive effect on the world economy.

China's cabinet also announced a shift to a "moderately easy" monetary policy, suggesting more rate cuts.

"'Easy' monetary policy could mean, quantitively speaking, more money supply and a looser market liquidity," the head of China's central bank, Zhou Xiaochuan, told reporters in Brazil. "It can also be reflected in prices, for example the bank lending interest rate could become lower."

China has cut rate cuts three times since mid-September.

"This is pretty major," said Arthur Kroeber, head of Dragonomics, a Beijing economic consultant. "It reflects the official view of how serious this problem is and shows that this is a government that can mobilize enormous resources to stimulate the economy when they put their minds to it."

By comparison, the United States sent out about $100 billion in tax rebate checks this summer, while Germany last week agreed to a 50 billion euro pump-priming plan.

China's Zhou, attending the meetings in Brazil, said on Saturday the Asian export powerhouse, which is one of the few remaining engines of global growth, expected growth of between 8 percent and 9 percent in 2009.

Some economists have predicted growth in China could slow to less than 8 percent in 2009, down from double-digit levels in the past five years until this year.