The global recession and China's stimulus package: A general equilibrium assessment of country level impacts

A dynamic computable general equilibrium model is developed to assess the impact of the recent global recession and the Chinese government's stimulus package on China's economic growth. By designing two scenarios - one with and one without the stimulus package - the model results show that GDP growth rate in 2009 could have fallen to 2.9% without the stimulus package, mainly as a result of the sharp decline in exports of manufactured goods. Under the stimulus scenario, with the generated additional demand on investment goods, the Chinese economy grows 8-10% in 2009 and the succeeding years. The model also measures the overall gains of the stimulus package, and the cumulative GDP growth difference between the two scenarios for 2009-15 is about RMB76 trillion.

► We model the impact of the recent global recession and the Chinese government's stimulus package on China's economic growth. ► The model shows that without the stimulus package China's GDP growth rate in 2009 could have fallen to 2.9%. ► The stimulus package creates investment demand and hence growth. ► The overall gains of the stimulus package measured by the cumulative GDP growth in the model is about RMB76 trillion.