China sets modest GDP growth target as economy improves

Beijing

CHINA on Friday set a modest annual economic growth target, at above 6 per cent, and pledged to create more jobs in cities than last year, as the world's second-biggest economy emerged from a year disrupted by the effects of Covid-19.

In 2020, China dropped a gross domestic product (GDP) growth target from the premier's work report for the first time since 2002 after the pandemic devastated its economy.

"As a general target, China's growth rate has been set at over 6 per cent for this year," Premier Li Keqiang said in his 2021 work report. "In setting this target, we have taken into account the recovery of economic activity."

China's GDP expanded 2.3 per cent last year, the only major economy to see growth. But the 2021 target was significantly below the consensus of analysts, who expect growth could beat 8 per cent this year. Chinese shares fell.

"If sequential growth averages zero from Q1 to Q4 this year, we will get around 6.1 per cent annual growth this year," Nomura said in a note. "Beijing does not want to set a growth target too close to 8 per cent as it does not want to slash the growth target next year."

Aninda Mitra, a senior sovereign analyst at BNY Mellon Investment Management, said the modest growth target will allow the authorities to emphasise the quality of growth rather than its quantity.

"In the aftermath of the pandemic, a low bar should allow most provinces to cross the hurdle without over-stretching themselves financially," the analyst added.

In 2020, China will target the creation of more than 11 million new urban jobs, Mr Li said in his report delivered at the opening of this year's meeting of Parliament. That is up from a goal of over nine million new urban jobs last year, and in line with recent years.

In line with an improving economy, the government is targeting a 2021 budget deficit of around 3.2 per cent of GDP, less than a goal of above 3.6 per cent last year.

The quota on local government special bond issuance was set at 3.65 trillion yuan (S$753.9 billion), also down from 3.75 trillion yuan in 2020.

China also has no plan to issue special treasury bonds this years, after issuing such bonds for the first time last year to support the virus-hit economy.

The government has set its 2021 target for consumer price inflation at around 3 per cent, compared with a target of around 3.5 per cent last year.

China aims to boost lending to small businesses from large commercial banks by over 30 per cent in 2021, according to the work report unveiled at the annual meeting of Parliament on Friday.

Also on Friday, Mr Li said China will also allow small enterprises to defer principal and interest repayments, guide banks to lower loan rates and support companies and industries hit by Covid-19.

Big commercial banks boosted lending to micro and small businesses by more than 50 per cent last year when the pandemic disrupted businesses and shut shops down for months.

Beijing will also strengthen oversight over financial holding companies and financial technology to ensure innovation follows regulation, said Mr Li. It also aims to move faster to promote the sharing of credit information. REUTERS