WASHINGTON -- China's decision to ward off the looming global recession by spending $586 billion on affordable housing, rural roads, airports and railways might put pressure on other world leaders to goose their limping economies.
The move also showcases Beijing's financial heft just five days before leaders of the G-20 group of countries gather here for a summit aimed at crafting a response to the global financial crisis. "China wants a bigger role in … (running) the world economy. This is a pretty good start," says Fred Bergsten, director of the Peterson Institute.
G-20 leaders are expected to assess crisis-fighting measures taken so far — such as sharp interest rate cuts by the Federal Reserve and other central banks — before seeking agreement on principles to guide future steps.
President Bush agreed to host Saturday's meeting after urgent calls from European leaders, including French President Nicolas Sarkozy, who support tougher regulations on cross-border financial dealings. But U.S. officials play down expectations for dramatic changes in global financial institutions, regulations or spending to emerge from the summit. The limited time scheduled — a Friday White House dinner followed by less than a full day of meetings Saturday — makes comprehensive changes unlikely.
President-elect Barack Obama, who will not attend the conclave, has called for the lame-duck Congress to enact an economic-stimulus program, including an extension of unemployment benefits and aid to hard-hit state governments. The White House and Senate Republicans might block such a measure, however, leaving Democrats to tackle it anew once Obama is sworn in next January.
Meanwhile, the Chinese initiative includes both new and previously planned projects. Spending will start before year's end and extend through 2010. The aim: keep the Chinese economy from slowing so much that social stability is endangered.
Michael Mussa, former chief economist at the International Monetary Fund, says new spending will likely total around $100 billion. Most projects will be intended to replace lost export revenue with home-grown spending. About one-quarter of the total should leak out into the global marketplace.
"It'll be a modest positive for the rest of the world," says Mussa, also with Peterson.