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China’s Stimulus Package Aims to Boost Economy, Help Avoid Global Recession

Asian and European stocks rose Monday on news of China's $586 billion stimulus plan that aims to restore investors' confidence and shore up markets over the next two years, while sending a message of resolve and financial stability to foreign governments. An economist discusses the plan's implications for China and the world.

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    Faced with its own economic slowdown, China announced yesterday a stimulus package of $586 billion, or 7 percent of China's GDP, for each of the next two years. The money will go for projects ranging from rural health and education to infrastructure.

    The news gave a big boost to stock markets in Asia and Europe, but not in the U.S.

    For more on China's move and its likely impact, we turn to Fred Bergsten, director of the Peterson Institute for International Economics in Washington. He's the author of "China's Rise," a new book about China's global role.

    And, Fred Bergsten, welcome back to the program.

    Now, China had something like 12 percent growth last year. It's still going to have very high growth this year. Why is it doing this?

    FRED BERGSTEN, Peterson Institute for International Economics: The Chinese were terrified by a potential drop in their growth below 7 percent or 8 percent, which they view as a recession.

    Anything below that level does not provide enough new jobs for the people coming into the labor force, moving out of the rural areas into the cities.

    So they've taken steps now to try to assure they meet their growth target of 8 percent to 9 percent for this year, next year, 2010, all of which would shield them from the global recession and actually give a big push to the world economy from their side.

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