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China winds down stimulus efforts, leading global recovery

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Exactly two years ago today (Tuesday), China issued its four trillion yuan stimulus package to tackle problems caused by the world's worst financial crisis since the great depression. Now, China has become one of the countries leading the global economic recovery.

As China begins winding down its four trillion yuan stimulus package, the success in limiting the damage from the financial crisis stands in sharp contrast to the struggling U.S. economy.

In a two-year construction boom that began in November 2008, China fast-tracked projects for new roads, bridges, and railways with bank loans, and rolled out policies and tax cuts to encourage domestic consumption.

The success has even surprised Yolanda Fernandez Lommen, head of China economics of the Asian Development Bank.

Yolanda Fernandez Lommen, Senior Economist of China Economics, Asia Development Bank said "It was put in place in record time, the amount involved in the stimulus was huge, and that's why the impact was so fast, so rapid and much stronger than expected. This is what has enabled this outstanding V-shaped recovery in China in 2009."

In late 2008 and early 2009, millions were laid off in China's southeastern region, the heart of the country's manufacturing might.

But authorities say the stimulus package cushioned against job losses, and is on track to create at least 24 million jobs, many for the country's hundreds of millions of migrant workers.

Chinese banks issued a record 9.6 trillion yuan of new loans last year.

Generous tax breaks on cars contributed to a boom that saw auto sales grow by 76 percent in the first quarter of 2010, from the same period last year.

Su Qiang, who manages a Beijing car dealership selling domestic brand Chery, said 2009 sales went through the roof.

Su Qiang, Manager of Chery Car Dealership said "The difference has been enormous. From last year, the entire country's auto market has expanded. And our dealership is no exception -- growth has been explosive. Last year we sold over 10,000 cars, that's twice as many as the year before."

China has since started to clamp down on lending to cool the economy. But the end of the stimulus is expected to be gradual, to avoid unnecessary impact on the the Chinese economy.

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