The Chinese Government hopes to save the economy from further slowdowns with a fiscal stimulus package worth approximately 4 trillion yuan ($586 billion) to boost domestic demand.

It was agreed on November 5 at an executive meeting of the State Council presided over by Premier Wen Jiabao that China must adopt "flexible and prudent" macro-control policies, given the volatile world situation and grim global economic outlook.

In the wake of the slowing economy and reduced inflationary pressure, the government has turned to a"proactive" fiscal policy and an "appropriately accommodative" monetary policy. The State Council, China's cabinet, said the government would take measures in 10 areas to stimulate domestic demand and propel the country's economic growth, showing the country's determination to maintain its steady and relatively high economic growth.

The 10 areas include infrastructure, social welfare, eco-environment improvements, post-earthquake reconstruction and income increases for urban and rural residents, especially for low-income groups. According to a preliminary estimation, the 10 measures will require about 4 trillion yuan in government expenditures by the end of 2010.

The 10 policies are as follows:

--Housing. Building more affordable and low-rent housing and revamping deteriorating shelters. A pilot program to rebuild rural housing will be expanded. Nomads will be encouraged to settle down.

--Rural infrastructure. Speeding up rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and ensure the safety of drinking water. This part of the plan also involves expediting the north-south water diversion project. Risky reservoirs will be reinforced. Water conservation measures in large-scale irrigation areas will be strengthened. Poverty-relief efforts will be further enhanced.

--Transportation. Accelerating the expansion of the transport network. This includes more passenger rail links and coal routes. Trunk railways will be extended and more airports will be built in western areas. Urban power grids will be upgraded.

--Health and education. Beefing up health and medical services by improving grass-roots medical systems and accelerating the development of cultural and educational sectors, including the construction of junior middle schools in western and central rural areas and more special educational and cultural facilities.

--Environment. Improving environment protection measures by enhancing the construction of sewage and waste treatment facilities and preventing water pollution in key areas. Accelerating the construction of green belts and natural forest-planting programs. Increasing support for energy conservation and pollution-control projects.

--Industry. Enhancing innovations and industrial restructuring designs and supporting the development of hi-tech and service industries.

-Disaster relief. Speeding up reconstruction in the areas hit by the May 12 earthquake.

--Income. Increasing average incomes in rural and urban areas. Raising next year's minimum grain purchase price and farm subsidies. Increasing subsidies for low-income urban residents. Increasing pension funds for enterprise employees and allowances for those in need.

--Taxes. Extending reforms in value-added tax regulations to all industries, which is expected to cut the tax corporate burden by 120 billion yuan ($17.6 billion). Technological upgrading will be encouraged.

--Finance. Enhancing financial support to maintain economic growth. Removing loan quotas on commercial lenders. Appropriately increasing bank credit for priority projects, rural areas, small and medium-sized enterprises, technological innovations and industrial rationalization through mergers and acquisitions.

The meeting required related government departments to take precise and substantial measures swiftly in offering the economy a heavy dose of fiscal stimulus. They have been instructed to make priority lists that focus on the most important issues, reinforce the management of related projects and improve the quality and efficiency of those projects. While giving priority to projects that already have been planned, they must launch new construction projects that are of great public concern or crucial to long-term national economic growth. Government departments concerned will focus on projects that will help boost economic growth while promoting the upgrading of China's industrial sectors. This is expected to propel short-term economic growth and position the country well for future development, as well as efficiently expand investment while actively boosting consumption.

Confidence was another message of the meeting. Government leaders stressed that despite the difficulties ahead, the domestic market is supported by huge untapped demand, a stable banking system and enterprises that display a strong capacity for adapting quick to change. They also emphasized that the worldwide economic crisis could offer opportunities for China to speed up its industrial restructuring and attract technicians and other talented professionals to work in China if the government promptly made the right policies and took the right measures.

The fiscal stimulus package is actually a combination of all the individual investment plans announced since mid-October. It includes funding for post-earthquake reconstruction that could amount to 700 billion yuan ($103 billion) and an upwardly revised plan for railway construction worth 1.37 trillion yuan ($201.5 billion) before the end of 2010.