China has approved 4 trillion yuan (€455bn) in new government spending between now and 2010, in a bid to offset declines in its economy.
It plans to shift the economy's focus away from struggling export markets to the domestic economy, promising to inject capital into infrastructure and social services.
The move was hailed by the head of the International Monetary Fund, Dominique Strauss-Kahn, who said it would have a positive effect on the world economy.
China's cabinet also announced a shift to a 'moderately easy' monetary policy, suggesting more rate cuts.
The move coincided with a meeting of officials from the world's 20 major economies.
The G20 meeting in Sao Paolo produced assurances that there would be no let-up in efforts to pull the world economy out from the doldrums.
Asian markets finished in positive territory following the announcement.
