China targets growth of about 6.5% amid drive to reduce risk

[BEIJING] China set a 2017 growth target of "around 6.5 per cent, or higher if possible" as focus shifts to easing risk and ensuring stability before a twice-a-decade leadership transition this year.

The objective outlined Sunday in Premier Li Keqiang's work report to the National People's Congress in Beijing compares with last year's target range of 6.5 per cent to 7 per cent. Economists surveyed by Bloomberg project 6.5 per cent expansion this year.

Other objectives included: M2 money supply growth target was cut to about 12 per cent from 13 per cent last year. Consumer price index target of about 3 per cent increase was unchanged from last year. Fiscal budget deficit ratio goal at 3 per cent of gross domestic product, also unchanged . Yuan exchange rate will be further liberalized, Mr Li says in the re port.

Top leaders working to steady economic growth also are shifting to a more neutral policy to reduce financial risks from excessive borrowing. Economic and social stability are key priorities before President Xi Jinping and his cadres gather later for a reshuffling of top officials, which is planned for the fourth quarter."

China has lowered the economic development targets across the board," said Zhou Hao, an economist at Commerzbank AG in Singapore. "China's policy stance has turned to risk control and bubble deflating. This means that the monetary policy will gradually tighten."

The report said "the RMB exchange rate will be further liberalized, and the currency's stable position in the global monetary system will be maintained." That's a change from last year's language saying the market-based mechanism for setting the exchange rate will be improved "to ensure it remains generally stable at an appropriate and balanced level."

The work report reiterated that China will pursue a prudent and neutral monetary policy this year. The People's Bank of China has left the benchmark interest rate at a record low while starting to tighten money market rates, and analysts expect further measures to cool lending without choking the wider economy ahead of the 19th Communist Party Congress.

BLOOMBERG