Beijing's Confidence Game

State TV says provinces are slating an eye-popping $1.5 trillion in stimulus spending. The reality is likely far more underwhelming.

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If China knows about anything, it is propaganda. The considerable power of the state's propaganda machine is now being thrown behind the effort to stop the economy from slowing too much.

On Sunday, as Prime Minister Wen Jiabao was on the last day of a three-day tour of Shanghai and Zhejiang province exhorting local companies to show confidence that they would get through what he called "difficult times," state broadcaster CCTV was reporting that provinces across China would add 10 trillion yuan ($1.5 trillion) to the 4 trillion yuan stimulus package that Beijing announced earlier this month.

Ten trillion yuan is an eye-catching number. It is twice the level of all state spending in 2007, not to mention two and a half times greater than the central government's proposed package of investments in infrastructure and social programs over two years. Lest we forget, Beijing was meant to be financing only a third of that directly; the rest was to come from provincial and local administrations, and from state-owned banks and companies.

It has not been clear what was new money in the 4 trillion yuan package and what old, already budgeted for in the current five-year plan or earmarked for natural disaster relief, and just bundled up to provide an eye-catching headline number. The 10 trillion yuan suffers from similar opaqueness behind the headline number.

CCTV came up with it after doing the rounds of the provinces counting up spending plans. The two biggest sets it found were 3 trillion yuan in Yunnan in the southwest and 2.3 trillion yuan in Guangdong, the southern export hub. These, though, are spending proposals, not commitments.

What we suspect is happening is this: after three years in which provincial governments have found financing infrastructure projects difficult as central government tried to stamp down on inflation by restricting credit, they are now rushing to find projects with which to lay claim to the 80 billion yuan not yet allocated out of the 100 billion yuan Beijing wants spent in the final quarter of this year. Those with the fattest pipeline, local officials believe, have the best chance of securing funding.

CCTV interviewed one local official in Hubei province who boasted how his colleagues had put in extra hours over the past two weeks as policy had suddenly reversed from curbing inflation to slowdown prevention, and had come up with 100 infrastructure and local develop projects to pitch. The official said their marching orders were to find already started projects being held back for lack of capital, or new projects that could give a quick boost to the economy.