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China cuts 2016 growth target amid continued economy concerns

Via The Guardian : Premier Li Keqiang tells opening of parliament that the nation’s economy is likely to grow at a slower rate than previously estimated

China has cut its growth target for this year to a range of 6.5% to 7%, down from 7%, a further sign that the world’s second-largest economy is slowing.

Premier Li Keqiang said in a speech at the opening of the National People’s Congress parliament, attended by 3,000 delegates, that among the “main development targets” for the nation was “GDP growth 6.5% to 7%”.
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The goal had been set at “about 7%” for 2015, but expansion came in at 6.9%, its lowest for a quarter of a century.

China’s leaders have traditionally declared the GDP goal at an easily achieved level that was regularly exceeded, and even then the objective is usually approximated to provide room for positive spin just in case.

Using a range, rather than a single figure, will widen the target even further.

The downwards revision comes after factory output contracted in China during February.

China’s economy has slowed steadily as the ruling Communist party tries to replace a model based on trade and investment with self-sustaining growth driven by domestic consumption.

China was also targeting consumer inflation of “around 3%” and unemployment “within 4.5%”, the text of Li’s speech said.

It did not give a specific target for trade, which fell in 2015, only aiming for “a steady rise in import and export volumes” and “a basic balance in international payments”.

It also pledged “further reductions in the release of major pollutants”.

“In setting a projected growth rate of between 6.5% and 7% we have taken into consideration the need to finish building a moderately prosperous society in all respects and the need to advance structural reform,” said the speech text, distributed to journalists at the Great Hall of the People in Beijing.

“It will also help guide market expectations and keep them stable.”

Li’s speech pledged that authorities would make much-needed cuts to overcapacity in the steel, coal, and “other industries facing difficulties”.

The country’s leaders have sought to reassure jittery global markets in recent weeks with a unified message that authorities still have monetary and fiscal policy tools in their arsenal to keep the economy from further slowdown.

The text of the speech projected a government deficit for 2016 of 2.18 trillion yuan, reaching a deficit-to-GDP ratio of 3%, which would be the highest since the founding of the People’s Republic in 1949.

A budget report given to parliament after Li’s speech showed China will raise its defence spending by 7.6%, a smaller increase than past years as it seeks a more efficient military.

It was the “lowest defence budget increase in six years”, the official news agency Xinhua said, adding it came “in the wake of rising economic headwinds and last year’s massive drawdown of service people”.

Agence-France Presse and the Associated Press contributed to this report

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