Try to picture a trillion dollars in your mind. Is it even humanly possible to imagine that much money?
That's how much is being estimated as new spending by provincial Chinese governments in a massive stimulus package to boost local economies. If reports from the China Securities Post and later carried by the state-owned China News Service are accurate, 7 trillion yuan or $1.1 trillion will be put to use combating the present economic slump (but the word slump is relative: China's GDP was still growing at 7.6 percent in second quarter of 2012).
It equates to roughly the size of the entire Turkish or Indonesian economies, according to figures from the IMF.
As paper currency, it would be enough 1-yuan bills, stacked flat one on top of the other, to get from the Earth to the surface of the moon and back again.
The amount could be even higher, since as yet undisclosed plans may become public in the near future. It's also a significantly higher figure than the 4 trillion yuan stimulus package the central government passed in 2008 to boost the economy, focused on huge investments in infrastructure (then worth $586 billion).
Much of that new 7 trillion yuan figure comes from a tabulation of new economic initiatives and plans released from provincial and municipal governments since early July, less than two months ago.
Critics of the 2008 stimulus boost say it left the economy overly dependent on investment, protected money-losing industries, inflated commodity prices, and unnecessarily increased capacity in steel, cement, and other sectors, along with intensifying corruption.
Central government leaders like Premier Wen Jiabao are now pushing eagerly for a restructuring of the economy, towards domestic consumption-led growth, the promotion of small and medium scale private enterprises, and towards a more stable housing market.
Which will leave many wondering, how is the rebalancing of the Chinese economy going to happen when local governments seem intent on the same plan as in the past?
Exports and investments together already account for nearly 50 percent of China's GDP -- a level unmatched in the world today and unprecedented at any time in history.
Supporters of the new stimulus may point out that the new investment is different in essence from that of 2008; that numerous regions and industries are still in need of investment; that the new investments will be more effectively managed and carefully directed. Then of course, there's also the too-big-to-fail argument, which in a country dominated by state-run companies, carries a weight unknown in Western markets. The World Bank and China's Development Research Center said earlier in 2012 that as much as one in four state-owned enterprises in the country are losing money.
Some local governments, such as China's metropolis of Nanjing on the Yangtze river, are putting forward plans to increase consumption in tourism, culture, entertainment, education, and health, as well as housing and cars. But the provincial-level governments, especially those in Guangdong and Chongqing, seem predominantly interested in using new investments to promote local industries in manufacturing and heavy industries, pinpointing electronics, advanced manufacturing, automobiles, petrochemicals, new materials, and energy sectors. In Guizhou, the provincial government is spending 3 trillion yuan over the next 10 years to develop the area into the country's leading tourist destination.
Those wary of the new wave of investments will also point out that the 2008 spending likely helped to worsen a property bubble that the government has been trying desperately to rein in over the past two years.
The Economist, citing an IMF report linked to economists Ashvin Ahuja and Alla Myrvoda, said in early August that a slowdown in real estate investment in China could lead to a 1 percentage point reduction in GDP in 2013. Real estate investment makes up essentially 20 percent of total Chinese investments. Such a slowdown could have follow-on effects as far away as Australia (which provides much of the iron for China's building boom), in Latin America (where copper is mined for the wiring in new housing), and even Japan and Germany (where much of the machinery used in construction is made).
An elderly woman walks past a hill overlooking new apartment blocks in Chongqing. Photo: Reuters
But even keeping that industry in check, as the central government has currently done with harsher regulations on housing purchases, may not be enough. Some are warning that China's property market is headed for collapse, implying greater woes for the entire economy.
Kiyohiko Nishimura, a deputy governor at the Bank of Japan specializing in asset booms, noted recently that China's own demographic decline coupled with its property bubble could bring about a similar slump to the one experienced by Japan in the early 1990s.
The UK's Telegraph quoted Nishimura as saying at a conference in Sydney that Not every bubble-bust episode leads to a financial crisis. However, if a demographic change, a property price bubble and a steep increase in loans coincide, then a financial crisis seems more likely. Nishimura said China was now entering a danger zone as construction hit 12 percent of GDP in 2011. In pre-bubble Japan, construction accounted for 10 percent of GDP.