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seen as the capital injection by China government into the market will create a multiplier effect when attract investment fund from private sector or encourage more spending from consumer market.

Table 2: Investment portfolio of China’s Stimulus Package

A big spending from China’s government will be one of the ways for government to inject capital or money into their country economic. It’s always seem as an effective tool to for the government to directly get involved in their country economic activities rather than just rely on the “Invisible Hand” theory to wait their economic have a self readjustment process and recover back to normal situation.

Here, we would like to have a further discussion about what are the actual action take by China Government and what are the result they achieved under their expansionary fiscal policy by stimulus package for year 2009-2010.

Increase of Government spending on public sector

The total spending on public sector will cover certain areas like railways, road, airport, power grid, disaster reconstruction, social welfare, water and electricity, healthcare, education and etc. However, the major part of the government spending on public sector was the development of country’s infrastructure; it covered around 40% out of the total value of the stimulus package. The increase in government spending on infrastructure project will create more public benefit, investment or business opportunities in private sector, and it also implies that the more investment from private sector will come together with the increase in spending by government.

Increase Consumption

In recent years, the low labor cost and materials cost in China providing them the opportunity to sell their product or export the product on cheaper price to other country. It’s also the main reason why the GDP of China maintaining in over 8% for few years recently. However, the recent global financial crisis was harmed most of the countries in the world and it also affected the amount of product export to other countries seem the economic slowdown will reduce the demand of other countries to China products. One of the purposes of China stimulus package for year 2009-2010 is to replace the reduction in international demand by increasing their domestic demand. It can be perform in the way like increase the income of citizen (e.g. tax reduction or tax rebate), and provide a better quality of public service to attract consumption (e.g. convenience healthcare systems, improve quality of education, and etc.).

Changed in Labor market

The infrastructure development projects are more focus on rural area and the transport network between rural and city. The development of rural area in China’s respectively lack behind if compare with the development in city areas. We can definitely see it from the pricing from 2 places, for example a condominium in Shang Hai’s might cost you a million RMB or even much more higher than that. However, a bungalow unit in rural areas might only cost you just a few hundred thousand. The lack behind of development of rural areas causes the surplus of labor and it’s also the reason rural citizen are starting to move to city in order for them the get a job opportunity. A huge amount of migration population from rural areas to city areas was cause the population in city become very crowd and it have cr