In an earlier analysis of possible stimulus plans for the United States, Lawrence Summers suggested that the key criteria for any stimulus plan should be that it would be “timely, targeted, and temporary”. By timely he meant that the impact of the expenditure should fall well within the period when a recession was expected, By targeted the goal was to focus the stimulus on individuals whose income had fallen and hence one could expect those individuals to try to maintain their past consumption levels and thus the stimulus would be spent not saved (or used to pay off debt). Temporary meant that the expenditures would fall during the recession period and not continue for a long period thereafter when additional expenditure of this sort might cause inflation rather than recovery. In looking at the actual Chinese stimulus package and in considering possible alternative uses of the stimulus, I suggest modifying the last two of these criteria and adding a fourth. These changes are made because China, as a developing country where the average per capita income is low, needs to spend its money in ways that contribute to long term growth and to the alleviation of poverty wherever possible even in a recession where the main objective of the stimulus is to end the recession.
Perkins, Dwight H. "An Outsider’s View of China’s Actual and Potential Stimulus Plans." Paper prepared for 2009 China Development Forum, Beijing, March 21-23, 2009.