China: Government Announces New Stimulus Package; Foxconn Faces New Labor Controversy
Microsoft and Boeing also make the news.
MINYANVILLE ORIGINAL While investors in the US ponder whether the Fed will unleash another round of quantitative easing, the Chinese government this week announced a new round of stimulus spending meant to jolt its own sluggish economy.
China announced that it will spend $156 billion building new subways, highways, and other infrastructure projects to ramp up growth. Analysts welcomed the move, though some asserted that it might be too late to prevent a third-quarter halt in the economy.
"The decision for the Chinese government to intensively announce these projects over the past two days signals a significant change in its policy stance from the incremental and reactive approach to a more decisive and proactive approach," Zhiwei Zhang, chief China economist at Nomura in Hong Kong, said in a note.
Because this year's slowdown in the Chinese economy has been more gradual than the collapse of late 2008, the stimulus package, though big, is significantly smaller than the 4 trillion yuan ($631 billion) pumped into infrastructure spending between 2009 and 2010.
A slew of banks, including Bank of America and Goldman Sachs, have lowered their forecasts for Chinese GDP growth this year. Earlier today, UBS and ING, which previously forecast GDP growth for the year at 8.0% and 8.1% respectively, cut their estimates to 7.5%.
Here is this week's business news:
Apple (AAPL): With the debut of the iPhone 5 only days away, Apple products assembler Foxconn is embroiled in a new labor controversy. According to the state-run China.org, several thousand Chinese students were taken out of school, bussed to Foxconn's factory in Jiangsu province, and forced to work on the production of the iPhone 5, because Foxconn could not find enough workers.
These students began work last Thursday and received a 1,550 yuan (US$243.97) a month salary for working six days a week, one of these workers alleged in a post on SINA's (SINA) microblog, Weibo, under the handle, mengniuIQ84.
The Verge states that Foxconn's Jiangsu factory handles component manufacturing and does not assemble finished products. As such, workers should not be able to know that they were handling parts of the iPhone 5, thereby casting doubt on the story.
For its part, Foxconn defend its practices, saying that students were free to leave the internship program whenever they wanted, and that interns made up only 2.7% of its China workforce.
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