China boosts its economic padding

China will spend more to support the economy, including providing subsidies for low income households.

China will spend more to support the economy, including providing subsidies for low income households.

Zhang Ping, chairman of the National Development and Reform Commission, told a news conference yesterday that the Chinese economy faced growing pressure and the global financial crisis had not bottomed yet.

“The impact is expanding globally and deepening in China,” he says. He warned that indicators show the economy weakened further in November and excessive bankruptcies and production cuts could lead to massive unemployment and stir social unrest.

The comments came one day after China’s central bank cut interest rates by a huge 1.08%. That, combined with the $870 billion fiscal stimulus package announced two weeks ago, reflects the concern over the economic outlook. The World Bank has forecast GDP growth for China of just 7.5% in 2009.

Meanwhile the Australian Government is trying to accelerate troubled negotiations on a free trade agreement with Beijing. Both sides have agreed to focus on key areas of interest and try to launch regular ministerial meetings next year. China wants cuts to Australia’s import tariffs on cars and textiles, clothing and footwear and less Government scrutiny on investment by state owned enterprises, The Australian Financial Review says today.

Australia is pushing for relaxation of China’s foreign investment rules in mining and other areas plus greater access for banks, telecommunications company and farm products.