CHINA’S NEW DEAL: A LETTER TO THE ECONOMIST (November 18, 2008)
The humongous stimulus package just unveiled by China’s State Council promises to quell the worst of the economic downturn, as you argue (“Reflating the Dragon,” November 15, 2008). Heavy emphasis on public works—infrastructure projects such as roads, railways, airports, and the power grid, as well as public housing for poor households—makes perfect sense in a developing country. In addition to eventually providing all the facilities very much needed, the construction sector also installs a great deal that is produced by all other sectors of the economy—from cement and steel to mechanical and electrical equipment to a wide range of furnishings, not to mention all the services. Every yuan spent on public works will thus reach deep into the national economy, which is precisely what is needed at this stage. The Chinese have surely mastered their New Deal, at least in broad terms.