Beijing - China on Sunday announced a major package of measures designed to stimulate domestic demand and buffer the economy against the effects of the global financial crisis.

The government would spend an estimated 4 trillion yuan (588 billion dollars) on infrastructure projects, reduce some taxes and loosen bank lending requirements, the official Xinhua news agency reported.

The package would finance 10 major infrastructure programmes over the next two years, including transportation, rural projects, low- cost housing, environmental projects and post-disaster reconstruction, the agency said.

The measures were agreed in a bid to "offset the adverse external economy by boosting domestic demand," it quoted the State Council, or cabinet, as saying in a statement.

Other measures include a reform of value-added taxes that would reduce the tax bills of companies by an estimated 120 billion yuan (17.6 billion dollars).

The government also decided to loosen lending rules for commercial banks to "channel more lending to priority projects, rural China, small and medium-sized enterprises, technical innovation, and mergers and acquisitions," the agency said.

"With the deepening of the global financial crisis over the past two months, the government must take flexible and prudent macro- economic policies to deal with the complex and changing situation," it quoted the statement as saying.

It said China would adopt "active" fiscal and "moderately active" monetary policies in aiming for "steady and relatively fast" economic growth.

State media had speculated last week that the Transport Ministry was working on a plan to invest 5 trillion yuan (730 billion dollars) over the next three to five years, following the government's allocation last month of 2 trillion yuan (290 billion dollars) for the construction of roads, waterways and harbours.

The government is also keen to boost employment after falling export caused tens of thousands of job losses this year in southern and eastern manufacturing bases.

China last month reported a 9-per-cent growth in its estimated gross domestic product (GDP) for July to September, maintaining fast but marginally slower expansion despite global financial woes.

China reported growth of 11.9 per cent in estimated GDP last year, its fastest growth since 1994. (dpa)