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China lowers growth target to about 7% as headwinds intensify
[BEIJING] China set the lowest economic growth target in more than 15 years as leaders tackle the side effects of a generation-long expansion that has spurred corruption, fueled debt risks and polluted skies and rivers.
The goal of about 7 per cent - down from last year's aspiration of about 7.5 per cent - was given in a work report that Premier Li Keqiang will deliver to the annual meeting of the legislature today in Beijing. The inflation target was set at about 3 per cent.
Headwinds that include a property slump, excess capacity in industry and disinflation prompted the second interest-rate cut in three months at the weekend. The government has vowed to move away from expansion at all costs as it tries to clean up the nation's environment and control a debt surge.
"The government will lower its growth target for 2015 to focus more on the quality than the quantity of growth," said Nomura Holdings Inc economists led by Zhao Yang in a note on Feb 27. "While reiterating that economic development is its primary task, we expect the NPC to also take a hard line on anti-corruption, committing to its clean governance efforts." Mr Li's work report, which opens the meeting of the National People's Congress, is his second since the 59-year-old was named premier toward the end of 2013's legislative gathering. Along with President Xi Jinping, the pair are seeking to increase efficiencies and strengthen market forces.
Policymakers are trying to balance the need to cushion the economy's slowdown with monetary and fiscal stimulus against longer-term goals. They're seeking to increase the role of private business, promote innovation and reshape the fiscal framework as they shift the economy from reliance on debt-fueled investment toward greater consumption and services.
Mr Li has said a slower expansion is tolerable as long as enough jobs are created. Even after growth slowed to 7.4 per cent last year, the weakest pace since 1990, the nation created 13.2 million new urban jobs, exceeding a target of 10 million and the previous year's 13.1 million.
The goal of about 7 per cent compares to the International Monetary Fund's forecast of a 6.8 per cent expansion this year and the World Bank's 7.1 per cent estimate.
The interest-rate cut announced Saturday reflected deepening concerns over the economy's slowdown. The People's Bank of China will cut deposit and lending rates again next quarter, according to economists surveyed by Bloomberg.
The global easing wave comes as the Federal Reserve edges closer to increasing interest rates, a move that would draw funds away from emerging markets.
The government last targeted an expansion of "about 7 per cent" in 1999. China ended up achieving 7.6 per cent growth that year.