Residents of rural China purchase a television and DVD player at the Shijihualiangouwu Market in Chenggong, Yunnan province.

China took over the lead in the race to beat the global economic crisis on Thursday, promising 8 percent growth and heavy social spending as US, European and Japanese data flagged.

Japanese stocks closed with a gain of 3 percent after a 2.23-percent surge on Wall Street in anticipation of a boost to the global economy from China.

But in Europe, stocks retreated as the Chinese strategy unfolded.

China faces “unprecedented difficulties and challenges,” over the crisis, Premier Wen Jiabao told the annual session of parliament.

He gave some details of stimulus spending to total 4 trillion yuan (US$585 billion), promising to massively boost social programs, but did not roll out a detailed blockbuster spending splurge as some observers had expected.

The country would overcome the crisis, he assured, forecasting that it could still achieve growth of 8 percent this year and that this was essential for “ensuring social stability.”

In Japan, Prime Minister Taro Aso said that “the economy is rapidly worsening, that there was “no bottom in sight” and “it is clear that the economy is in a severe state.”

And the US Federal Reserve central bank said in an assessment late Wednesday that US activity “deteriorated further” in February and that a significant pickup was not expected before late this year or early 2010.

In Europe, data for German retail sales showed an unexpected fall of 0.6 percent in January. This was because gloom and fear of unemployment were “weighing considerably” on private spending, UniCredit economist Alexander Koch said.

Investment bank Goldman Sachs estimated that the total size of all eurozone stimulus packages had risen to about 200 billion euros from 130 billion euros in its last estimate in October, on the assumption that all of the money was used.

Much global attention was focused on announcements in China, widely considered to have vast capacity to stimulate activity and import goods and services, thanks to economic strength and huge foreign reserves built up through a long run of export-driven activity.

This in turn is attributed largely to low labor costs and, in the view notably of the US, to a low exchange rate for the yuan.

Among the social spending announced by Wen was a 17.6-percent increase in social security spending to 293 billion yuan ($43 billion), a 38.2- percent rise in spending on health care to 118.1 billion yuan, and 42 billion yuan for job creation.

And China would keep the exchange rate of the yuan basically stable this year, he said.

A China expert at City University of Hong Kong, Joseph Cheng, commented: “This spending will improve the quality of life for the people, and it will also enhance the legitimacy of the regime.”

In Singapore, the New York oil contract rose by 12 cents to $45.50 a barrel with analysts saying this was because of signs that demand in China and the US could strengthen.

On the corporate front, the newly merged French energy giant GDF Suez reported a 13-percent rise in net profit last year to 6.5 billion euros ($8.2 billion) on strong oil and gas prices, and forecast a further rise in operating profit this year despite the crisis.

Source: AFP