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05-03-2015, 11:18 PM
China warns of hurdles in growth: 7pc target
THE AUSTRALIAN MARCH 06, 2015 12:00AM
Scott Murdoch
China Correspondent
Beijing
China's lower growth future
CHINESE Premier Li Keqiang has warned that the country’s economy faces substantial hurdles to meet its 7 per cent growth rate target this year, but hopes a fresh round of financial market reform will help drive development plans.
The Work Report, delivered at the Great Hall of the People in Beijing on the first day of the National People’s Congress yesterday, also reduced China’s inflation rate target from 3.5 per cent to 3 per cent.
A majority of economists predicted the 7 per cent growth target after China’s economy grew by 7.4 per cent in 2014, the slowest rate since 1990.
In his speech, Mr Li said China was now confronting a “new normal” in terms of growth but that the government was determined that development would be more stable than the rapid double-digit expansions that occurred over the past decade.
The government has set the target of creating 10 million new jobs in both urban and regional areas across China.
The local market was unmoved by the news, with the S&P/ASX 200 closing largely flat at 5904.2.
“A growth rate of approximately 7 per cent will ensure ample employment,” Mr Li said.
“This target is both aligned with our goal of finishing building a moderately prosperous society in all respects and is appropriate in terms of the need to grow and upgrade our economy.
“It is also in keeping with the objective laws of development as well as conditions in China. If China’s economy can grow at this rate for a relatively long time we will secure a more solid material foundation for modernisation.”
China will raise its budget deficit to 2.3 per cent of gross domestic product for 2015, up from last year’s target of 2.1 per cent.
The growth rate is expected to come under renewed pressure this year as a result of the government’s anti-corruption measures and pressure to help fix the country’s pollution crisis.
China’s reforms matter on a global level, and especially to Australia, with China being our biggest trading partner.
If China ends up favouring short-term growth over restructuring this year, this could give a boost to a world economy that is suffering from Europe’s malaise and an unsteady recovery in the US. But it could also raise questions about China’s long-term role as a global economic growth engine.
Mr Li said uncertain global economic growth could also hinder growth projections this year.
“The world economy is undergoing profound adjustment ... the influence of geopolitics is increasing and there are a greater number of uncertainties at play,” he said. “Promoting growth, creating jobs and making structural adjustments have become common goals for the international community.
“With downward pressure on China’s economy building and deep-seated problems in development surfacing, the difficulties that we are to encounter in the year ahead may be even more formidable than those of last year.”
Mr Li said the government would this year press ahead with its financial market reforms that it had been working on for the past two years. It plans to allow greater private investment in the domestic financial services groups in a bid to safeguard the nation’s banking sector.
The government has also flagged that the next step of its interest rate liberalisation plan would be the introduction of a deposit insurance scheme. The People’s Bank of China has been given greater regulatory powers to implement the plans this year.
Citic Securities chief economist Zhu Jianfang said the 7 per cent growth target was a realistic aim for the government this year that should help its job creation scheme.
“It is appropriate, it is within a reasonable range and requires a lower limit of government control,” Mr Zhu said.
“In the long run it can help with the goal of doubling the GDP by 2020. And in the short term, if we can keep to 7 per cent growth then newly created employment can be absorbed and there will not be any obvious new unemployment.
“Another very important factor is that maintaining 7 per cent growth could help avoid a debt crisis.”
Nomura chief China economist Yang Zhao said the lower target would also help the government implement more ambitious reforms.
“The lower growth target, in our opinion, reflects the government’s awareness of an economic ‘new normal’ of slower growth and the urgent need for structural reform,” he said.
“The adjustment of the growth targets also reflects the government’s resolution to restructure the economy.”
Additional reporting: Wang Yuanyuan.
THE AUSTRALIAN MARCH 06, 2015 12:00AM
Scott Murdoch
China Correspondent
Beijing
China's lower growth future
CHINESE Premier Li Keqiang has warned that the country’s economy faces substantial hurdles to meet its 7 per cent growth rate target this year, but hopes a fresh round of financial market reform will help drive development plans.
The Work Report, delivered at the Great Hall of the People in Beijing on the first day of the National People’s Congress yesterday, also reduced China’s inflation rate target from 3.5 per cent to 3 per cent.
A majority of economists predicted the 7 per cent growth target after China’s economy grew by 7.4 per cent in 2014, the slowest rate since 1990.
In his speech, Mr Li said China was now confronting a “new normal” in terms of growth but that the government was determined that development would be more stable than the rapid double-digit expansions that occurred over the past decade.
The government has set the target of creating 10 million new jobs in both urban and regional areas across China.
The local market was unmoved by the news, with the S&P/ASX 200 closing largely flat at 5904.2.
“A growth rate of approximately 7 per cent will ensure ample employment,” Mr Li said.
“This target is both aligned with our goal of finishing building a moderately prosperous society in all respects and is appropriate in terms of the need to grow and upgrade our economy.
“It is also in keeping with the objective laws of development as well as conditions in China. If China’s economy can grow at this rate for a relatively long time we will secure a more solid material foundation for modernisation.”
China will raise its budget deficit to 2.3 per cent of gross domestic product for 2015, up from last year’s target of 2.1 per cent.
The growth rate is expected to come under renewed pressure this year as a result of the government’s anti-corruption measures and pressure to help fix the country’s pollution crisis.
China’s reforms matter on a global level, and especially to Australia, with China being our biggest trading partner.
If China ends up favouring short-term growth over restructuring this year, this could give a boost to a world economy that is suffering from Europe’s malaise and an unsteady recovery in the US. But it could also raise questions about China’s long-term role as a global economic growth engine.
Mr Li said uncertain global economic growth could also hinder growth projections this year.
“The world economy is undergoing profound adjustment ... the influence of geopolitics is increasing and there are a greater number of uncertainties at play,” he said. “Promoting growth, creating jobs and making structural adjustments have become common goals for the international community.
“With downward pressure on China’s economy building and deep-seated problems in development surfacing, the difficulties that we are to encounter in the year ahead may be even more formidable than those of last year.”
Mr Li said the government would this year press ahead with its financial market reforms that it had been working on for the past two years. It plans to allow greater private investment in the domestic financial services groups in a bid to safeguard the nation’s banking sector.
The government has also flagged that the next step of its interest rate liberalisation plan would be the introduction of a deposit insurance scheme. The People’s Bank of China has been given greater regulatory powers to implement the plans this year.
Citic Securities chief economist Zhu Jianfang said the 7 per cent growth target was a realistic aim for the government this year that should help its job creation scheme.
“It is appropriate, it is within a reasonable range and requires a lower limit of government control,” Mr Zhu said.
“In the long run it can help with the goal of doubling the GDP by 2020. And in the short term, if we can keep to 7 per cent growth then newly created employment can be absorbed and there will not be any obvious new unemployment.
“Another very important factor is that maintaining 7 per cent growth could help avoid a debt crisis.”
Nomura chief China economist Yang Zhao said the lower target would also help the government implement more ambitious reforms.
“The lower growth target, in our opinion, reflects the government’s awareness of an economic ‘new normal’ of slower growth and the urgent need for structural reform,” he said.
“The adjustment of the growth targets also reflects the government’s resolution to restructure the economy.”
Additional reporting: Wang Yuanyuan.