China’s top economic official on Sunday set this year’s growth target at about 6.5 per cent, down from last year’s 6.7 per cent expansion as Beijing tries to build a consumer-driven economy and reduce reliance on trade and investment.
In a report to the national legislature, Premier Li Keqiang Li promised further steps to reduce excess steel production that is straining trade relations with Washington and Europe. He warned against the danger of rising political pressure for restraints on trade in Western economies.
Mr. Li said the growth target is in line with efforts to overhaul industry and create a “moderately prosperous society.” Li’s target of “around 6.5 per cent or higher if possible” is down from last year’s goal of 6.5 to 7 per cent but, if it is achieved, still would be among the world’s strongest.
Growth in the world’s second-largest economy has cooled steadily since 2010 as communist leaders try to develop a consumer-driven economy and reduce reliance on trade, heavy industry and investment.
Chinese leaders have tried to downplay the significance of the annual growth target and shift focus to improvements in incomes, consumer spending and other factors. But the official target still is closely watched as a forecast of economic performance, which has repercussions throughout Asia, where China is the biggest trading partner for all its neighbors.
Private sector analysts expect no major initiatives to be announced at the legislature, which comes ahead of a congress of the ruling Communist Party late this year at which President Xi Jinping is due to be installed for a second five-year term as party leader. That increases pressure to avoid major changes as party figures jockey for political advantage.
Instead, economists expect communist leaders to use the ceremonial legislature to emphasize official efforts to reduce surging debt and strengthen China’s financial system. Banking and securities regulators have said in the past two weeks that reducing risk and tightening supervision of financial industries is this year’s priority.
“We must be fully alert to the buildup of risks related to non-performing assets, bond defaults, shadow banking, and Internet finance,” said Mr. Li’s report.
Beijing’s reliance on repeated infusions of credit to prop up growth since the 2008 global crisis has driven up China’s debt levels, prompting concern they could trigger a banking crisis or drag on the economy.
Total debt owed by local governments, companies and households has soared from the equivalent of 150 per cent of annual economic output before 2008 to about 260 per cent. Regulators have begun trying to hammer out deals to reduce debt loads at state companies but private sector economists say they need to move faster.
Economists have warned setting a growth target too high could force Beijing to resort to stimulus spending, setting back efforts to reduce reliance on investment and debt.
Mr. Li’s report warned China faces “more complicated and graver situations” at home and abroad at a time when political pressure in the United States and Europe for restraints on trade is growing.
“Both deglobalization trend and protectionism are growing,” said Mr. Li’s report. “There are many uncertainties about the direction of the major economies’ policies and their spillover effects, and the factors that could cause instability and uncertainty are visibly increasing.”
China has emerged as a vocal supporter of free trade in response to President Donald Trump’s promises to raise duties on Chinese goods, though Beijing’s trading partners complain it is the most closed major economy.
Sunday’s report calls for creating 11 million new jobs, an increase from last year’s target of 10 million in a possible of increased official confidence efforts to stimulate creation of new industries are gaining traction.
Mr. Li promised to eliminate 50 million metric tonnes of steel production capacity. That would help to reduce the flood of Chinese exports that is depressing global prices and prompting complaints by Washington and Europe that thousands of jobs are in danger.
The Premier also promised to eliminate 150 million tonnes of coal production capacity.
Mr. Li promised “equal opportunities” and “fair rules” to private companies in the state-dominated economy.
Party leaders have pledged repeated to give entrepreneurs, who create most of China’s new jobs and wealth, a bigger economic role. But reform advocates complain state companies still control industries from banking to telecoms to energy and benefit from monopolies, low-cost bank loans and other favors.
