A Wall Street Journal article today titled ‘China’s Stimulus Spurs U.S. Business’ reports that “China’s efforts to quickly pump up its economy are providing a much-needed boost for U.S. businesses as well”, and that “A growing number of companies, from tire and excavator makers to fast-food chains, are benefiting from China’s $585 billion stimulus program, which has quickly funneled money into everything from bridges to consumers’ pockets”. The article reports:

• Caterpillar Inc.’s Chief Executive James W. Owens as saying the company’s excavator sales in China have returned to record levels in recent months, bouncing back from plummeting sales over the winter;

• Lakshmi Mittal, CEO of Arcelor Mittal, the world’s largest steelmaker, saying China’s stimulus package is finally starting to increase demand for steel;

• a U.S. based economist as saying “The hope is that China would become an engine of growth to drive the global economy out of this severe recession - much as the U.S. was the engine of growth that drove the global economy after the dot-com collapse; and,

• a recent World Bank forecast says stimulus spending in China will represent three-quarters of the 6.5% GDP growth it sees for China this year.

The article also reports the World Bank as saying that much of the Chinese stimulus money is for “projects that were already envisaged in the government’s longer-term plans”. This is important, because the article more than once refers to the speed at which China has been able to mobilize its stimulus spending on projects that have long been in the planning stages – in contrast to the U.S. where many of the ‘stimulus spending projects’ are in early planning stages or have to be ‘invented’ (my word). In any event, that China’s stimulus spending activity is already proving positive for heavy equipment and steel manufacturers is very constructive (no pun intended). That China is leading the world in economic recovery is no surprise to me. China has an extraordinarily large U.S.$ holding and a low cost work force. But think hard about what you would have said only 10 years ago if someone had told you the U.S. economy was going to be in ruins in 2009 and China would be looked to as a very important part of its salvation. Unless you are different than most, I suspect you would have laughed and ordered another drink. I further suspect few Americans are laughing now, are likely to laugh again for some long time, and many are ordering two drinks instead of one.

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