A couple months ago, China’s Premier Wen Jiabao said, “The biggest contribution we can make to the world economy under the current circumstances is to maintain China’s strong, stable and relatively fast growth, and avoid big fluctuations.”

Sunday night the Chinese government announced its fiscal stimulus plan worth USD586 billion, which will be implemented over the next couple years. This is the largest fiscal stimulation package since former Premier Zhu Rongji adopted fiscal expansion strategies in late 1990s.

The key themes in the 10-point plan are investment and construction. Housing, rural sector, health, education, transportation, irrigation systems and other water and waste treatment infrastructure will be the focus of the plan.

China has been moving slowly with its efforts to boost its economy this year as global economic conditions deteriorate at an accelerating pace. Just last week I wrote about how puzzled I was regarding the widespread doubt many hold about China’s ability to move forward and modernize its economy, as well as its ability to stimulate growth. See my premium service, The Silk Road Investor, for the full story. After yesterday’s announcement, however, very few commentators are still in doubt.

China is taking this proactive stance from a position of strength, as its debt to GDP ratio hovers around 16 percent and its foreign exchange reserves are still solid at around USD 2 trillion.

It will be a huge positive for the world’s economy if the Chinese are successful in their efforts to sustain a respectable growth rate next year; expectations call for a deep recession and more bad news from the US and European economies.

Finally, the Chinese decided to make their move just a week ahead of the upcoming G20 meeting in Washington, DC, where the world’s biggest debtor is hosting a number of both advanced and emerging countries to discuss the global financial system.

Importantly, some of the main creditor nations will be present. Among them are China, Russia, Saudi Arabia, various oil-rich countries of the Middle East and Japan. They will each contribute to the plan going forward, and their host will be obliged to listen to their input.

Unfortunately, the President Elect won’t be present, but hopefully there will be several meetings held between certain key figures of his team and representatives of the other countries. It only seems prudent at a time like this.

I wrote a brief commentary on this blog back in August entitled “The NATO Membership” at the beginning of the Russia-Georgia conflict. The idea was that the president of Georgia was trying to put the US and the EU in a tough spot by instigating a fight with Russia. And as I wrote then “… get ready for more amusement as the usual suspects start publishing analysis calling for the ‘democratic’ Georgian forces versus the enemy’s totalitarian forces.”

Well, it seems now that the story played out just as we thought it would. Furthermore, even the most myopic, anti-Russian publications in this part of the world are now obliged to report a different story. More and more evidence completely discrediting Georgia’s story are becoming the norm all around the world.

Once again, investors in the region should try to assess the risks by looking at the drawbacks of the Russian economy rather than looking at it as a big, bad state that’s trying to harm its weak neighbors. The latter is not only a bad investment process but also indicates inclination to easily believe propaganda material–a rather sad state of mind indeed.