INTERNATIONAL

China scraps GDP target, hikes defence spending

Slowing march:Paramilitary officers marching in front of the Forbidden City in Beijing. China on Friday announced it would hike defence spending by 6.6%.AFP

Slowing march:Paramilitary officers marching in front of the Forbidden City in Beijing. China on Friday announced it would hike defence spending by 6.6%.AFP  

Country’s economic and trade situation is very uncertain and development is facing unpredictable factors, says premier Li

China has for the first time in 30 years scrapped announcing an annual GDP target, underlining the severe economic challenge facing the world’s second largest economy in the midst of the COVID-19 pandemic.

“We have not set a specific target for economic growth for the year, mainly because the global epidemic situation, and economic and trade situation, are very uncertain, and China’s development is facing some unpredictable factors,” Premier Li Keqiang said on Friday at the start of the annual session of the National People’s Congress (NPC), or Parliament.

The NPC, scheduled for March 5, had been delayed on account of the COVID-19 outbreak. The NPC’s 3,000 or so legislators, barring the top leadership of the Communist Party, attended the session in Beijing’s Great Hall of the People wearing masks.

The holding of the NPC has been seen in China as reflecting a return to some normalcy after more than three months of lockdown following the outbreak in Wuhan.

The country still faces enormous economic challenges, confronting a slowdown at home and a collapse of external demand. China’s economy contracted by 6.8% in the first quarter, the first contraction since the end of the Cultural Revolution in 1976.

Mr. Li said rather than a target for growth, the focus would be on “ensuring stability on the six fronts and security in the six areas”. The “six fronts” were employment, the financial sector, foreign trade, foreign investment, domestic investment, and expectations, while the “six areas” referred to job security, basic living needs, operations of market entities, food and energy security, stable industrial and supply chains, and the normal functioning of primary-level governments.

The policy priority this year will be on job creation, with reports of widespread job losses during the first quarter. Mr. Li announced a target for 9 million new jobs in 2020.

Modernisation of PLA

China on Friday also announced it would hike defence spending by 6.6%, down from 7.5% last year. This would bring the proposed military budget to around $179 billion.

Much of the spending will fund the ongoing modernisation of the People’s Liberation Army (PLA), and particularly on the expansion of the PLA Navy and the PLA Rocket Force, which have been garnering an increasing share. The Army has been downsized by 300,000 with a current active force of around 2 million.

Last year, China unveiled its first homegrown aircraft carrier, while two more are in construction. China in 2019 also unveiled its most advanced intercontinental ballistic missile, the Dongfeng-41, with an estimated 14,000 km range, capable of reaching the U.S.

“The modernisation process has been on track,” said Lt. Gen. S.L. Narasimhan, Member, National Security Advisory Board. “This is a good hike given the performance of the economy.”

This year’s budget will lift China’s spending to around four times India’s budget of $44 billion, excluding pensions of $18 billion. While China does not specify the spending on pensions, the expense is shared by the Ministry of Veteran Affairs as well as provincial governments.

Compared with India, China also spends less on defence imports given its indigenous defence industry.

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