China’s Visionary Stimulus

China's CN¥4 trillion post-crisis stimulus has been widely criticized for leading to excessive monetary growth. But the policy also helped to expand China’s foreign trade and boost its external financial strength, thereby creating space for the current government to pursue its ambitious reform agenda.

SHANGHAI – In March of last year, the first session of China’s 12th National People’s Congress began with then-Premier Wen Jiabao delivering his tenth and final “report on the work of the government.” When he had finished, the 3,000 representatives in attendance gave him a resounding ovation that was surely a response to more than the report; it was a display of praise and respect for his achievements as the head of China’s government.

Since then, however, assessments of Wen’s leadership – particularly his stewardship of the economy – have varied widely. Whereas Wen’s supporters remain adamant that he fundamentally supported a shift toward democracy and a market economy for China, his critics lambast him for failing to fulfill his promises of political and economic reform. As Wen’s successor, Li Keqiang, attempts to engineer deep systemic reforms, understanding Wen’s policy decisions could not be more relevant.

Wen’s most contentious economic policy was the CN¥4 trillion ($586 billion) stimulus package that his government launched in response to the 2008 financial crisis. Though the policy succeeded in buttressing China’s economic growth, it was widely criticized as an overreaction – one that led to excessive monetary expansion.

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