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uch higher than in base run which 8.9% compare to 2.9% in the same year. Besides that, the industrial, services and agricultural sector also benefits from the stimulus package.

Figure 3: Annual growth rate of total and sectoral GDP in the base run (%), 2008-15

Figure 3.2: Annual growth rate of total and sectoral GDP in the stimulus run (%), 2008-15

In general, utilize of production capacity explained the growth in industrial sector while another two sectors which is service and agricultural sector raise driven by demand. From the stimulus package, it is obvious the government target domestic investment and demand for domestic factors and inputs because most measures applied in this few areas. As a result, the main engine for this stimulating growth by the stimulus package will be effect of domestic demand.

Figure 4: Growth in domestic demand and produced products, base and stimulus runs, 2008–15

From the figure above, domestic production sector other than mining and manufacturing falls sharply in year 2009 without stimulus run, while during the same period with stimulus run, growth rate raise in all the domestic production sectors. Besides that, in figure 5, it shows the stimulus package also benefits to trade in either domestic production or consumption. Although there is an improvement, but it will not back to the peak in recent years unless government reduce dependency on external markets and focus on domestic markets in growth.

Figure 5: Share of exports in total production & Share of imports in total demand, base and stimulus runs (%) 2008–15

From the DCGE research model, when China experience global recession and without a government stimulus package, demand for labour will be decline or stop growing. If government implement the stimulus package, result estimate to be move towards another way which increase in demand of labour. The reason behind an increase demand of labour is due to job opportunity created in the industrial and service sector. The results contribute to one of the important design of this stimulus which is to lower the unemployment pressure in China.

Figure 6: Growth in low-skilled labour demand under base and stimulus run (%) 2008-15

According to Xinshen Diao, Yumei Zhang, Kevin Z. Chen (2010)’s research, the accumulative gains of stimulus package lead China’s GDP to increase about 76 trillion RMB over the next seven years and it will be three times of China’s 2007 GDP. On the other hand, China’s total exports also expected to gains about US$ 5.6 trillion from the period. The figure may still be an underestimated figure because expected long-run impact of public investment on growth and other factors.

Figure 7: Overall gains of the stimulus package in real GDP (RMB trillion) 2007-15

In short-run, according to research model that without government stimulus package, although the financial crisis just a short phenomenon, but China economy will need longer time to recover due to recession. It is a wise step for China government to implement stimulus package as it will not only help in the short-run shock of the crisis, but also lead a rapid growth for the China’s economy after the shock.

Impact in Medium and Long-term

Although expansionary fiscal policy (stimulus package) able to avoid fall in growth, but for medium and