This time, the global impact of China’s stimulus package will hinge on several key factors, including its size and reach, its success in enhancing domestic growth, and the strength of the country’s economic ties to other countries.
The timing of China’s new stimulus package is not coincidental. Arriving just before the 75th anniversary of the People’s Republic, the announcement was well-received by equity investors, leading to a surge of more than 15% in the country’s main stock indices.
The new package is reminiscent of the RMB4 trillion ($735 billion) stimulus China introduced in late 2008 to shield its economy from the 2008 to 2010 Global Financial Crisis. That earlier package successfully made China one of the only major economies that did not suffer a severe recession and, in fact, raised China’s real GDP growth to 10% in 2010. It also provided a much-needed boost to global demand for other countries.
