China lowers annual growth target to 7%

Mar 05, 2015, 3:19 PM EST
Chinese Premier Li Keqiang delivers his work report at the opening of the 3rd Session of the 12th National People's Congress at the Great Hall of the People on March 5, 2015 in Beijing, China. The government work report presented the main targets of economic and social development, a projected 2015 GDP growth of about 7 percent; and consumer prices rising about 3 percent.
Lintao Zhang/Getty Images

China lowered its annual GDP growth target to about 7% today, which is “the new normal” for the country’s economy. AFP reports that the figure announced by Premier Li Keqiang is the lowest since a similar goal in 2004 and comes after China's gross domestic product (GDP) expanded 7.4 per cent in 2014, the slowest pace in 24 years. Last year's target was "about 7.5 per cent". The cut was widely expected by economists and reflects the reality of a multi-year slowdown in the Asian giant that has seen it come off regular annual double-digit expansions. 

AP notes that communist leaders say they are comfortable with the slowdown that President Xi Jinping, invoking an American phrase, has dubbed "the new normal." But in a sign they are afraid of a politically dangerous spike in joblessness, they have tried to spur activity with two interest rate cuts since November and a reduction in business taxes. Li promised to give entrepreneurs and foreign investors a bigger role in an economy that after three decades of market-oriented reforms still is dominated by government-owned banks, oil producers and other companies. Beijing will cut in half the number of fields in service and manufacturing industries in which foreign investment is restricted, the premier said. He gave no details but the change has long been sought by foreign companies that face a thicket of restrictions and feel increasingly unwelcome.

In the short-term, China's top policymakers are grappling to sustain an economy weighed down by a cooling property market, high debt levels and excess factory capacity, according to Reuters. Over the longer run, they are seeking to boost consumption to relieve overdependence on export markets and cut wasteful investment. Adding a fiscal boost to the central bank's monetary support, Beijing plans to lift government spending to 17.15 trillion yuan ($2.74 trillion) in 2015, an increase of 10.6 percent on 2014. That will mean raising the budget deficit to 1.62 trillion yuan, or around 2.3 percent of GDP, compared with 2.1 percent last year and the widest since 2009, when Beijing unleashed a stimulus splurge in response to the financial crisis. Some of the extra money will be spent on railway and water projects and modernizing agriculture, although the chairman of the government's economic planning agency, Xu Shaoshi, said its investment plans should not be seen as a "massive stimulus".

"We will implement the 'Made in China 2025' strategy, seek innovation-driven development, apply smart technology, strengthen foundations, pursue green development and redouble our efforts to upgrade China from a manufacturer of quantity to one of quality," Li said. With Communist Party leaders ever mindful of social stability, Li said China aimed to create more than 10 million new jobs in 2015 and would ensure the jobless rate does not exceed 4.5 percent. China targeted a registered urban unemployment rate of 4.6 percent last year.

 

 

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