No New Stimulus Package Announced

Despite market rallies yesterday based on speculation that China would announce a fresh new stimulus package today, Premier Wen didn't announce any specific plans for new money to be injected into China's economy.

From The New York Times:

BEIJING — Warning that China faces “unprecedented difficulties and challenges,” Premier Wen Jiabao outlined a barrage of construction, increased subsidies and economic measures on Thursday aimed at continuing his nation’s modernization despite a world financial crisis.

He also indicated that China’s leaders would seek to begin a fundamental shift in their economic strategy by encouraging citizens to spend and consume more goods, as in most Western economies. China’s startling growth has been driven so far by exports and abundant spending on roads, dams and other infrastructure projects, a trend that experts say cannot be sustained in the long term.

But in a long speech to the National People’s Congress, China’s legislature, Mr. Wen did not explicitly announce any new spending to combat the financial crisis beyond the $585 billion that China committed to spend in November.

China’s stock market rose about 6 percent on Wednesday, and other global markets also advanced, on speculation that Mr. Wen would announce still more economic stimulus spending.

Instead, he said that while 2009 would be a year of “arduous tasks,” China’s economic strategy was sound and the nation’s fundamentally positive outlook was unchanged.

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It's obvious that the rest of Asia, as well as the rest of the world, are looking to China as a barometer of the world economy. Seeing that China is being viewed as one of the important players in the economic crisis, there are many reasons to be concerned.

Rural migrants are finding nothing to do except return to farms, homelessness is on the rise, and those living in the countryside are cutting back on eating meat.

From The Washington Post:

As tens of thousands of manufacturing companies have collapsed amid slowing demand due to the global economic crisis, the laid-off workers can no longer find jobs in the cities. For many, returning to their rural roots is not a possibility because their families' farmland has been sold off to make room for shopping malls, office high-rises and apartment complexes -- leaving them with no safety net. Even those lucky enough to have kept their farming plots have been hit hard by a drought -- the country's worst in 50 years, according to the government -- which has affected up to 80 percent of the land for winter crops.

"The drought has had a big impact on farmers. Some villages are out of food," said Lu Xuejing, a professor at the Capital University of Economics and Business in Beijing. The impact has been especially pronounced in the nation's northwest, in provinces such as Gansu, where high temperatures combined with sparse rainfall have dried up riverbeds and killed wheat crops. This convergence of factors has meant the unthinkable for a country that in recent years has enjoyed double-digit growth in gross domestic product: As many as 10 percent of China's 130 million migrant workers face what Renmin University professor Yao Yuqun calls "bread-and-butter issues." They are having trouble putting food on the table because "they no longer have farmland, and they lost their jobs in the cities," Yao said.

Read the entire article

Outside of the common folk who are facing "bread-and-butter issues," the more globalized parts of China also appear to be hurting badly. Foreign investment is down by as much as 40% in former boomtowns, bankruptcies are cracking global supply chains, and the cheap goods which had flowed out of China's factories for years have stopped streaming out of the country.

Indeed, there seems to be little hope to me that "we've hit bottom" or that "things are about to turn around."