BEIJING There is no doubt that China's near-$600 billion economic stimulus package is gigantic but, like so much in the opaque country, it is shrouded in ambiguities that complicate any assessment of its likely impact.
First and foremost, the size of the stimulus may be smaller than advertised.
Announcing the package on Sunday night, the government billed it as 4 trillion yuan ($586 billion) in extra spending, or roughly 15 percent of this year's estimated gross domestic product. Adjectives such as whopping or stonking come to mind.
Several qualifications, though, are necessary.
The money is to be spent by the end of 2010, meaning it will be spread over nine quarters rather than blasted out in one shot. That cuts the stimulus to about six percent of GDP per year.
Then there is the question of how much is actual new spending.
"The stimulus package is big, but it's actually a combination of a lot of things that have already been announced," said Ken Peng, a Citigroup economist in Shanghai.
For example, Beijing said it would devote 20 billion yuan to investment in Sichuan province and other areas of the country devastated by the earthquake earlier this year. But as the package announcement itself indicated, that was simply speeding up money earmarked for post-quake building next year.
It "is a 'gross' concept in the sense that some of the investment would have been made without the stimulus package anyways," Yu Song, an economist at Goldman Sachs, wrote in a note to clients.
Officials have been flagging measures to pump up demand since growth slowed unexpectedly sharply to 9.0 percent in the third quarter from 10.4 percent in the first half.
The Ministry of Railways had declared plans for 2 trillion yuan of spending between 2006 and 2011, and official media have reported that the Ministry of Transportation would spend an additional 5 trillion yuan in the next three years or so.
Surely some of that was included in the headline figure trumpeted as the stimulus, said Ting Lu, an economist at Merrill Lynch.
Lu calculated that about 2.4 trillion yuan was actually new spending -- and much of that was simply ascribing a concrete figure to investment promises made weeks ago, such as building better rural roads and more medical clinics.
FINDING THE MONEY
Another question is how China will come up with the cash.
The central government will foot the bill for only a portion, perhaps as little as one-quarter, of the package.
According to the plan, 400 billion yuan is set to gush forth as stimulus this year. Of that, Beijing said it would spend 100 billion yuan, with the remainder coming from local governments and unspecified "social investment."
An official source told Reuters that this would be the template for the rest of the package: Beijing would spend 1 trillion yuan in all, leaving ocal governments and society to generate 3 trillion yuan.
Any big burst of public spending would be expected to have a big multiplier effect, as the initial expenditure echoes throughout the private sector. Could the allusion to "social investment" suggest that the government is including multiplier estimates within its declared stimulus target?
"It's not easy in China to tell the difference between central government money, local government money and 'social' money," Lu said.
However big the central government's share of spending, China is in a better position than virtually any other country to turn on its cash spigots.
Even if 4 trillion yuan in spending and tax cuts was financed entirely by new government borrowing -- an extreme projection -- China's national debt-to-GDP ratio would still be less than 35 percent, compared with 75 percent in the United States and 150 percent in Japan, according to calculations by Frank Gong, an economist at JPMorgan.
ENSURING A SOFT LANDING
Whatever the doubts about the exact scale of the stimulus package, Beijing's determined response to its darkening economic outlook delivered a boost to sentiment.
China's benchmark stock index surged more than 7 percent as investors came round to the view that, though slowing, the country's economy was destined for a soft landing.
Even if just fleshing out previous policy intentions, the stimulus package offered important details about how the government would spend its money, particularly in the commitment to invest in public housing, Tao Wang, an economist with UBS in Beijing, said.
"This should help to address some skepticism in the market about the government's ability to find the right projects and time to enact stimulus measures," she wrote in a note.
It is also easy to make too much of the fiscal side of the stimulus, as the government was clear that monetary policy would have a vital role to play.
Beijing said in its announcement that it would adopt an "appropriately accommodative monetary policy," the first time it has ever used such wording.
After cutting interest rates three times since mid-September, that should shore up expectations for more loosening, and soon.
"It's still necessary for monetary policy to complement the fiscal package," Citigroup's Peng said.
And the stimulus, far from being a done deal, may still be a work in progress. The two-page package announcement contained just five hard numbers and the government has plenty of fiscal ammunition to draw on as it adds meat to the bones.
"There is still more room," Lu at Merrill Lynch said.
(Editing by Ken Wills & Jan Dahinten)