China Economy
Andy Wong  /  AP
Chinese carry their daily products after shopping at a supermarket, with a huge sales advertisement on display seen thourgh a window in Beijing, China.
updated 12/8/2008 11:08:01 AM ET 2008-12-08T16:08:01

Chinese leaders began weighing possible plans Monday to expand a massive stimulus package with higher spending on health and social programs amid signs an economic slowdown is worsening.

The meeting of top planners also might consider proposals to boost exports, cut income taxes and to inject government money into slumping Chinese stock markets, according to state media and analysts. The government has released no agenda for the meeting.

The meeting comes as Beijing tries to figure out how to get the most out of a 4 trillion yuan ($586 billion) package announced Nov. 9 that is meant to shield China from a global slowdown with spending on construction and other projects.

Optimism that the meeting will produce more steps to bolster the economy lifted stock markets in Hong Kong and Shanghai.

The plan's key goal is to lift consumer spending, and analysts say that is unlikely until Beijing creates a stronger social safety net for Chinese families, which have to save heavily to pay for health care, schooling and retirement.

Alarm about job losses and possible unrest has mounted after economic growth slowed in the last quarter to 9 percent, down from 2007's 11.9 percent. A slowdown in factory output, construction and other areas is worsening.

The annual planning meeting of top Communist Party and Cabinet officials is meant to make strategy for 2009. The government's Xinhua News Agency announced it opened Monday morning but gave no details of the agenda or who would attend. Last year's participants included President Hu Jintao and Premier Wen Jiabao.

Hu warned Communist Party leaders in a Nov. 29 speech that China was losing its competitive edge and said the downturn would test their "governing ability."

China's planning agency, the Cabinet's National Development and Reform Commission, was working on a plan for more spending on schools, health and other social programs, according to the Economic Observer, a leading Chinese business newspaper.

The Cabinet and NDRC press offices did not respond to requests for information.

Other Chinese news reports said planners might consider proposals to boost slowing export growth.

They also might take up a proposal to cut taxes on lower-income Chinese workers, said Merrill Lynch economists Ting Lu and T.J. Bond in report. They said policymakers also might try to support stock markets but they downplayed the effectiveness of a stabilization fund.

"We think it's just a token move on the part of the central government to try to revive investors' confidence," they said.

China and the United States, in a joint announcement after two days of economic talks, pledged Friday to boost exports by offering up to $20 billion in loans to finance imports of their goods by developing countries. Such credit in developing economies has dried up as lenders try to shield themselves from global financial turmoil.

The planning meeting also might release details of how Beijing will finance its stimulus package, the government newspaper China Daily said.

Officials say the central government will pay for 1.2 trillion yuan ($176 billion) of the package, with the rest coming from local governments and state companies. But no details have been released.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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