China’s leadership cut this year’s growth target for its slowing economy to 6.5-7 per cent and promised Saturday to open its oil and telecoms industries to private competitors as part of sweeping reforms aimed at boosting productivity and incomes.
The growth target, down from last year’s “about 7 percent” and less than half of 2007’s peak of 14.2 per cent, was included in a work report delivered by Premier Li Keqiang to China’s national legislature in front of nearly 3,000 delegates gathered in the cavernous Great Hall of the People.
“We must deepen reform across the board,” he said in a nationally televised speech. He said the market “must play a decisive role.”
The world’s second-largest economy has cooled steadily over the past five years as the ruling Communist Party tries to replace a worn-out model based on trade and investment with self-sustaining growth driven by domestic consumption. The growth in 2015 declined to a 25-year low of 6.9 per cent and is forecast to drift lower this year.
The plans call for transforming China into a middle-income economy with self-sustaining growth driven by consumer spending instead of investment, trade and heavy industry. That requires the ruling party to cut the dominance of State companies that dominate industries from banking and telecoms to oil and steel and give entrepreneurs a bigger role.
Mr. Li promised to open service and manufacturing industries wider to foreign investors, though he gave no details. He promised regulations would be made “more fair, transparent and predictable” to attract investment. Business groups have complained Chinese regulators are hampering access to promising sectors in violation of its free-trading pledges.
Much of China’s slowdown has been self-imposed as regulators clamped down on a building boom and nurtured retailing, tourism and other service industries. An unexpectedly sharp downturn over the past two years has raised the risk of politically dangerous job losses and prompted Beijing to shore up growth with mini-stimulus efforts.
The latest growth target would be the minimum Chinese leaders have said is required to achieve the official goal of doubling incomes per person from 2010 levels by 2020.
The country needs to create more than 50 million new urban jobs during the five years through 2020, Mr. Li said.
The Premier pledged to accelerate “supply-side reform,” or the painful process of shrinking bloated industries from steel to cement to aluminium in which supply exceeds demand.
That glut has led to price-cutting wars that are driving companies into bankruptcy. Steel producers have responded by exporting their surplus, prompting complaints by China’s trading partners.
Mr. Li said Beijing will promote mergers and shut down “zombie enterprises”, the Chinese term for companies that are kept afloat by cheap loans from State banks. He said targets will include the coal and steel industries, for which plans already were announced in February, but didn’t give details of other sectors that will be affected.
The government said this week it expects to eliminate 1.8 million coal mining jobs about 17 per cent of the industry’s workforce.
