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Tuesday, November 11, 2008

China, China, China!

More on the China Stimulus Plan ...

$586 billion is a massive number for an economy the size of China's. Recall our first stimulus package here was $150 billion, and a second that is assumed to total $300 billion is under discussion. China's economy on a purchasing power parity basis is estimated to be about $7 trillion dollars as of 2007, versus its size at then current exchange rates of just under $3 trillion. By contrast, the US economy was just under $13 trillion, so if you accept the larger PPP value, the Chinese stimulus package would be tantamount to a $1.1 trillion program here (and even larger if you use the nominal exchange rate).

XX Sean's note -- the question now being asked on Wall Street is how is China going to pay or this plan? Maybe by selling some of those $541 bilion in US Treasuries they have stashed away as part of their $2 trillion in foreign reserves? What would that do to the price of U.S. Treasuries?

Copper Falls on Concern China's Consumption Will Take Months to Rebound Copper fell in London on speculation China's $586 billion spending to support its economy will take months to spur demand for the metal used in cars and homes.

China Stocks May Need More Than Stimulus to Lure Investors After 66% Drop China may have more work ahead to revive investors’ confidence in the world’s worst-performing major stock market after unveiling a 4 trillion yuan ($586 billion) stimulus plan.

Noble Says Commodities Bottoming, to Rebound on Government Spending Plans Noble Group Ltd., the commodity supplier that more than doubled third-quarter profit, forecast a rebound in demand for metals and grains over the next 12 to 18 months as government investment programs boost economic growth.


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