"An array of upstream industries in infrastructure spending like steel and cement will gain momentum from the stimulation campaign," he said. "Meanwhile, the agriculture and hi-tech sectors will also receive a large number of funds." Zhuang said.
Construction-related boom
Analysts say the more effective way of propping up domestic demand, for the short term, is still direct spending by the government on infrastructure, which could drive up investments and at the same time widen employment.
Following in the footsteps of the Central Government, several ministries and local governments have pledged to invest aggressively to help execute the stimulus package.
- The Ministry of Railways has planned to invest 600 billion yuan ($87.8 billion) in railway construction in 2009.
- The Ministry of Housing and Urban-Rural Development has planned to spend 900 billion yuan ($131.8 billion) in the next three years to build affordable homes.
- The Civil Aviation Administration of China has planned to invest 400 billion yuan ($58.6 billion) in airport construction by the end of 2010.
- The Ministry of Transport has planned to spend an annual average of 1 trillion yuan ($146.4 billion) on transport infrastructure over the next two years.
Among the local governments that have made known its spending plans, Beijing will spend 240 billion yuan ($35.1 billion) on subways and other transport infrastructure projects by 2012, overshadowing the 170 billion yuan ($24.9 billion) it spent in the five-year run-up to the Olympics. Guangdong will put in place 222 new investment projects worth a total of 2.37 trillion yuan ($347 billion) over next few years.
Analysts said the immense rural and urban construction projects would create huge demand for some necessary building materials such as cement and steel. Zhuang Chunlai, Vice General Secretary of China Cement Association, said in a statement that infrastructure investment would deliver a rapid turnaround to the sluggish cement market, offsetting the real estate downturns. "The cement euphoria will be soon felt around next March if the spending plans swiftly come into practice," Zhuang said.
On the steel front, analysts estimated that the stimulus package would trigger new demand for at least 100 million tons, around 20 percent of last year's total output. This would breathe some life into the sector, but still not enough to reverse the loss-making streak of many steelmakers given the drooping manufacturing sector that accounts for half of the country's steel use, according to a recent report by China International Capital Corp. Ltd., a joint-venture investment bank.
Besides this, a handful of other construction-related sectors, such as machinery equipment and the chemical industry, also are expected to pick up steam thanks to the economic stimulation program.
Agricultural rebound
Given the weighty importance of agriculture in China's economy, the government has placed more emphasis in the stimulus plan on its commitment to revitalizing the countryside, following the deeper rural reform it initiated in late October.
As part of the package, the government will raise the minimum grain purchase price and distribute more subsidies for farmers to purchase quality seeds and farm machinery next year. It will cancel part of the export tax on grain, and lower the one on fertilizers. The government also will disburse funds to help the forestry industry recover after it was hit hard by the snowstorms at the beginning of this year.
"The pro-agriculture policies combined with the rural infrastructure improvement will boost farmers' income and unleash their consumption potential," Tan Yaling said. "A flourishing rural consumer market would help wean the economic growth off investment and the export boom that have been the main driving engines over the past five years."
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