A better day for Wall Street… stocks opened sharply higher in early trading, with Dow jumping up 300 points. 
The traders’ optimism was spurred on by the recently-announced economic stimulus plans of the incoming Obama Administration.  Over the weekend, Barack Obama tried to make the case for the massive government spending program built on infrastructure projects and promised to create at least 2 ½ million jobs in the U.S.  The government program will make public buildings energy-efficient, rebuild the nation’s highways, renovate aging schools and install computers in classrooms, extend high-speed Internet to underserved areas and modernize hospitals by giving them access to electronic medical records.

Economists and policy wonks have been in agreement advocating for increased infrastructure investment as the right stimulus vehicle for the U.S. (above the infrastructure investment’s own merit of satisfying our development needs as a nation). 

Remember China’s last month announcement that they are going to invest $586 billion for their own economic stimulus?  Almost 80% of that package is proposed to be invested in infrastructure, too.  But now the Chinese officials are acknowledging that the announcement was rushed and the plan was not well thought-out.  The heavy infrastructure investment part is being criticized by experts as the wrong kind of stimulus for China.  Massive infusions of funds in that sector of the Chinese economy can stimulate Chinese manufacturing sectors even further, but some sectors, like steel manufacturing are already suffering from over-capacity.

And the Financial Times in today’s editorial argued that infrastructure investment-heavy stimulus program is unlikely to stimulate increased consumer spending in China, which is what the Chinese economy desperately needs. Chinese policy shift to start depreciating their currency again, despite all the promises to the contrary, being further departure from correct actions that China needs to undertake.  It’s too bad, U.S. Treasury Secretary Paulson could do little but smile while the Chinese were lecturing him about what to do during these tough economic times at the Strategic Economic Dialogue talks in Beijing last week. 
 

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