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November 11, 2008

China joins global financial rescue drive
China pitched in nearly $600 billion to the global effort to avoid the worst economic downturn in decades, while grim Japanese data on Monday offered more proof of the damage caused by the global financial crisis, reported Reuters.

With mounting evidence that the United States, Japan, the euro area, Britain and other developed nations are in recession, investors and leaders have looked to China to do its bit in propping up a faltering global economy.

The world's fourth-largest economy is still expanding at a healthy rate and is one of few nations that can still afford fiscal pump-priming, although growth has slowed markedly from heady double-digit rates seen in the past six years.

Beijing announced on Sunday plans to re-engineer growth shifting the economy's focus away from struggling export markets to the domestic economy, promising to spend 4 trillion yuan ($586 billion) on infrastructure and social services.

It also flagged a shift to a "moderately easy" monetary policy, possibly heralding further reductions in borrowing costs after three cuts since mid-September.

"This is clearly another significant step toward combating global economic risks," Goldman Sachs economist Yu Sing said.

The news buoyed Asian stock markets and drove commodity prices higher, with Tokyo shares gaining more than 5 percent and markets elsewhere in Asia up more than 2 percent.

China's move coincided with a meeting of officials from the world's 20 major economies, who pledged to act to contain the fallout from the credit crisis triggered by the downturn in the U.S. housing market 15 months ago.

The G20 meeting in Sao Paolo produced assurances that there would be no let-up in efforts to pull the world economy out from the doldrums, but specific action would more likely come from a crisis summit of world leaders on November 15 in Washington.

China's stimulus plan comes on top of more than $4 trillion in bank bailouts, credit guarantees and fiscal spending pledged by governments around the world to contain the damage from the worst financial turmoil since the 1930s Great Depression.

But with Chinese industry shifting down because of a slump in export markets, some of Australia's top producers have been forced to scale back output and investment plans. On Monday, mining giant Rio Tinto announced a 10 percent cut in iron ore shipments.

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