China has recently announced a $586 billion stimulus plan to boost its economy amid slowing export orders for its manufactured products as a result of the global financial crisis.

The stimulus plan would help in increasing expenditure on infrastructure including construction of new railways. The idea is to boost employment and local demand to offset the fallout of the global recession and keep GDP growth from declining abruptly.

China's GDP growth slowed down to nine per cent in the third quarter of the current year which is reportedly the lowest in the last five years.

Although the growth of nine per cent would still be considered high, it did not satisfy the Chinese government which needs to create jobs for millions of new workers joining its labour force every year.

Usually, government spending plans are recommended by economists in times of depression or recession, when the private sector is unwilling to invest due to drop in the domestic demand. In such an event, government spending creates job opportunities and demand for raw material and machinery which keeps the wheels of the economy moving and paves the way for an economic recovery.

Exporters of many products in China were running into trouble, as demand slowed in the United States and Western Europe. The export manager of Huang Yang Bronze, a producer of aluminum wire in China, complained that his exports had dropped by nearly half since July and he had cut his workforce by a quarter.

Some of the most dramatic decline in China's exports to the United States had been witnessed in case of consumer electronics, garments and toys.When orders from the US importers declined many Chinese companies switched over to the export markets in Western Europe. Soon China's exports to Western Europe surpassed those to the US.

However, the trouble in the US did not take much time in spreading overseas to Europe. Thus, European demand for Chinese products, also, started weakening. At this point, exporters in China found it impossible to export their goods elsewhere.

A few of the exporters, who sold their goods only to emerging markets in Eastern Europe and South America, had reported that demand in those markets was still strong.

However, the emerging markets could not be an alternative to the US and Western Europe as they did not have the capacity to absorb the massive Chinese exports.

The global economic downturn came as a shock to the Chinese huge export sector, which had been enjoying annual growth of 20 to 30 per cent over the last few years.

Concerns over declining export earnings had hard-hit share prices across China. The Shanghai A-share market lost two-thirds of its value during last year, while the Hang Seng index in Hong Kong dropped by nearly half during the same period.

A large number of workers employed in the export-related industries in China had reportedly lost their jobs, although many of such workers had been re-employed in factories serving the domestic Chinese market.

China's stimulus plan might not be enough and the country may need a multi-pronged strategy such as increase in investment abroad by its business community and investors to deal with the situation.

An instance increase in the level of Chinese foreign investment could provide new business opportunities to those who had gone out of business or whose volume of business had been drastically reduced. By investing abroad, such businessmen can remain in business and continue to earn profits. Chinese investors can produce goods (for their domestic markets as well as exports) at a much lower cost, if they invest in a low-cost country like Pakistan.

Pakistan needs foreign investment to increase its foreign exchange earnings and improve employment. Chinese can invest in our energy sector, export-related manufacturing, oil and gas, farming sector, etc.

The IMF balance of payments support has brought to an end the economic uncertainty and has enabled the government to avert any possible default in the short- to medium-term. However, the government would take effective measures to improve the security environment and ensure round the clock power supply to the productive sectors to attract foreign investment, in a big way.