Beijing's stimulus package may help support sales of Japanese farm equipment, Brazilian iron ore and California machine tools, taking some of the edge off what might be the worst global recession in three decades.
The ripple effect of the four trillion yuan (HK$4.55 trillion) plan announced on November 9 underscores the mainland's increasingly important role in the world economy as its policymakers work to keep the country's growth close to 8 percent next year.

Merrill Lynch said expansion would have cooled to 5 percent without the program from 9.5 percent this year.

The mainland economy is still the fastest growing among the world's 20 largest; and its plan, equivalent to 14 percent of gross domestic product over two years, would likely have the strongest impact in places that are its biggest suppliers of goods, including Japan, Taiwan and South Korea.

"It's a significant guarantee to growth in China," said Louis Kuijs, an economist at the World Bank in Beijing. "China can boost spending and provide a cushion to growth domestically and to all of its trading partners."

The plan allocates money for housing, rural development, railroads, power grids and rebuilding after May's earthquake in Sichuan province. It also allows tax deductions for purchases of machinery to stimulate investment.

"Industries such as railway, construction, cement, steel and other metals will benefit," said Ting Lu, a Merrill Lynch economist in Hong Kong. "These industries are connected wi
th the rest of the world."

Merrill estimates the package will add three percentage points a year to the mainland's expansion, spurring growth to 8.6 percent next year and 8.5 percent in 2010.

Before Beijing introduced its plan, the International Monetary Fund forecast that growth worldwide would fall to 2.2 percent next year from 3.7 percent this year and that the United States, Japan and the eurozone would all contract.

"It's going to help economies that supply infrastructure to China, like Germany and Australia," said Kevin Gaynor, head of economic and interest- rate strategy at Royal Bank of Scotland Group in London.

Among economies with the most at stake are Taiwan, which shipped almost 36 percent of its total exports to the mainland last year; South Korea, which sent 25 percent; and Japan, which shipped 19 percent, according to UBS.

For every one percentage point that the mainland increases its growth rate, the rest of Asia will be boosted by half that, Citigroup chief Asia economist Huang Yiping said in Hong Kong.

Engineering and construction companies are likely to be among the major beneficiaries of the stimulus plan, said Donald Straszheim, vice chairman of Roth Capital Partners, a US investment bank specializing in emerging markets.

"Spending on necessary infrastructure such as rail, roads and affordable housing are expected to reinforce China's long-term growth potential," said Vivek Tulpule, chief economist for Rio Tinto, the world's second-biggest exporter of iron ore.

"The package will provide a welcome boost to Chinese economic activity and the resources industry."

Shares of Kubota, Japan's largest maker of agricultural equipment, have surged 19 percent since the package was announced, while Hitachi Construction Machinery, Asia's second-largest maker of earthmovers, gained 15 percent.

The stimulus is "a big chance" for Komatsu, the world's second-largest construction-machinery maker, said Masahiro Yoneyama, director of mainland operations.

"This will contribute greatly to Komatsu's overall profitability."

In Singapore, Hyflux, a water- treatment firm that gets about 90 percent of sales from government contracts, expects to gain from the plan.

Hyflux builds plants in provincial cities in the mainland as well as the Middle East, and the stimulus package "is going to help to unblock" current projects that are "stalled and create new ones," deputy chief executive Sam Ong said.

Three European makers of power grids and equipment - ABB in Zurich, Schneider Electric in Rueil-Malmaison, France, and Atlas Copco in Stockholm - may get more orders because of the plan.

In a research note, Exane BNP Paribas analyst Arnaud Brossard said ABB "could benefit from accelerated spending" on power plants, Atlas' construction and mining business might be helped, and Schneider could see a boost in its building and manufacturing operations.

Oxnard, California-based Haas Automation sold more than 1,000 machines used for aerospace, automotive and other production in China last year at prices ranging from US$30,000 (HK$234,000) to several hundred thousand dollars and expects to sell 1,250 machines this year.

"Any stimulation of manufacturing in China is going to have an effect on our business," said Haas marketing product manager Scott Rathburn.

Erin Ennis, vice president of the US- China Business Council, expects a boost for companies ranging from construction firms to tool makers.

She said China's desire to improve its health-care system could also help American providers of medical products and services.

"Our hope is that the spending is as broad as possible," she said. The Washington association represents 250 US firms that export to China.

The impact may even spread to Brazil, where Cia Vale do Rio Doce, the world's biggest iron-ore producer, is based. China accounted for 20.5 percent of its total third-quarter revenue of US$12.1 billion.