BEIJING — Reports that China is about to announce a major new economic-stimulus package coincided Wednesday with the largest surge in the stock market in nearly four months.
Premier Wen Jiabao is to offer the stimulus package, the second since November, when he speaks Thursday morning to the opening session of the National People's Assembly.
A spokesman for the assembly, Li Zhaoxing, confirmed the pending package in a news conference Wednesday in which he also announced that China will boost its military spending by a "modest" 14.9 percent. It marks the 19th time in the past two decades that the annual defense budget has risen by double digits.
Li said that in Wen's annual work report to the 2,985-member National People's Congress, "there will be an announcement of a new stimulus package."
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China announced last November that it was pouring 4 trillion yuan (about $585 billion) into its slowing economy to deal with the global financial crisis, which has seriously pinched its mammoth manufacturing sector.
In Shanghai, the benchmark composite index rose 6.1 percent to 2,198.11 on Wednesday, the biggest gain since the jump Nov. 10 after the announcement of the previous spending plan.
Stephen Green, the chief China economist for Standard Chartered, said in a report this week that he'd heard from government officials in February that a new stimulus might be as large as $1.2 trillion to $1.5 trillion in spending over two years.
Millions of Chinese workers have lost their jobs in recent months as factories slow down in the once-vibrant Yangtze and Pearl River delta manufacturing regions, stoking fears of potential social instability.
So far, China is holding to the estimate that its economy will grow 8 percent this year, down from about 9 percent last year and about 13 percent in 2007. Any slowdown beyond 8 percent would sharply raise the possibility of joblessness-related unrest, economists say.
The nation's leaders strive to be seen as responsive to the pain of those who are losing factory jobs, and Li spent part of the news conference describing symbolic cutbacks among top officials.
"When our president . . . and prime minister invite foreign heads of state, during the state banquet the menu will not exceed one soup and three dishes," Li said. "No Chinese liquor will be served."
Li, a former foreign minister, said that the increase in the defense budget would go primarily to boost salaries, provide training in counter-terrorism and disaster relief and increase the digital capabilities of the People's Liberation Army, the world's biggest military.
"China's limited military force is mainly to protect our sovereignty and would not threaten any country," Li said, adding that the budget increase was "modest" when compared with last year, when the defense budget rose 17.6 percent.
The United States, Japan and their allies have complained that China's motives in steadily boosting defense spending haven't been clear, causing them some concern about the nation's strategic intentions and generating fears that it may spur a regional arms race.
China's declared defense budget of $70.2 billion is about a seventh of the $515 billion that the U.S. government has budgeted for the Pentagon in the 2009 fiscal year. That amount doesn't include large outlays for the wars in Iraq and Afghanistan, which are financed separately.
In a policy report earlier this year, China said that the army needed to be prepared to protect the nation's growing interests around the globe and deal with new types of conflicts brought about by increased competition for food and oil supplies.
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