China on Monday set its growth target for 2012 at a lower-than-expected 7.5 per cent, in an indication that its focus during a crucial transition year would be on maintaining stability and achieving more balanced growth.
The government also announced a steep 11.5 per cent rise in its domestic security spending, which will for the first time cross $ 100 billion this year. Spending on internal security is set to surpass the military budget for a second consecutive year, in a reflection of Beijing’s concerns about internal instability ahead of a once-in-a-decade leadership transition.
Premier Wen Jiabao told the opening session of the National People’s Congress (NPC), the Chinese Parliament, that the government would place an emphasis on “making progress while maintaining stability” while looking to address the dual challenges of transforming the economy and addressing “social conflicts”, rather than focus merely on high growth.
The 7.5 per cent target is the first in eight years that has fallen below 8 per cent, long seen by Chinese officials as the minimum level of growth needed to maintain internal stability. The Chinese economy does, usually, exceed the annual targets set by the government, and is expected to grow beyond the 8 per cent figure this year as well. The economy grew by 9.2 per cent in 2011, down from 10.4 per cent in 2010.
Mr. Wen painted a grim picture of both the global economy and the challenges to be faced at home in his annual address, warning that the sovereign debt crisis and recession in the West would adversely impact China’s exports, a main driver of growth.
“The road to global economic recovery will be tortuous,” he warned. “The global financial crisis is still evolving, and some countries will find it hard to ease the sovereign debt crisis any time soon."
Emerging economies, on the other hand, faced "the dual pressures of inflation and slowing economic growth.”
The Chinese Premier also warned of pressing domestic challenges, calling for more balanced growth to address inequality and achieve sustainable development. The economy was not meeting energy conservation targets, he said, cautioning that it had become “more urgent but also more difficult" to address structural problems and "alleviate the problem of unbalanced, uncoordinated, and unsustainable development.”
"Social stability" in focus
As China faces a landmark leadership transition this year, which will see Mr. Wen and President Hu Jintao step down in a once-in-ten year leadership change, the government’s focus is expected to be fixed firmly on maintaining social stability.
Mr. Wen made little mention of taking forward either economic or political reforms, amid calls ahead of the opening of Parliament for pushing forward measures to curb the rising influence of the State-sector to create better conditions for private enterprise and to encourage innovation.
Mr. Wen did mention, without providing specific details, that China would “transform government functions and balance the relationship between government and the market,” as well as “encourage non-governmental investment” in sectors ranging from railways and finance to energy, which have so far been under the control of State companies.
Mr. Wen said the government would “work hard to resolve social conflicts”, particularly the expropriation of rural collective land, which sparked according to several studies tens of thousands of “mass incidents” in Chinese provinces last year.
The Ministry of Finance in its annual report detailed a massive $ 111.4 billion budget for “public security”, which includes police and state security, marking a 11.5 per cent increase. This even exceeds the expected outlay on defence spending, which was announced on Sunday as $ 106.4 billion, a 11.2 per cent rise from the previous year.
Mr. Wen also announced a number of social welfare measures as the government grapples with widening income inequalities. These included boosting spending on education to 4 per cent of the GDP, the provision of full coverage of the pension system for rural and non-working urban residents, increasing subsidies for medical insurance and the building of 7 million low-income housing units.
