China’s top economic planner on Sunday voiced assurance that the country’s economy is not heading for hard landing or tough times. Last year’s growth rate of 6.9 percent was the lowest number the emerging market had posted in 25 years.
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Premier Li Keqiang announced a growth target of 6.5 to 7 percent in a report to the national legislature on Beijing’s plans for the year.
“In general, I think China’s economy performance has stayed at a reasonable range (since 2015)”, Xu said, adding that the Chinese economy shouldn’t be viewed through traditional perspectives. This year’s session, however, will see the final adoption of China’s next Five Year Plan, which will cover the period from 2016-2020, giving even more heft to the proceedings. By striving for higher growth in 2016, the first year of the 13th Five-Year Plan, the government could get an upper hand for 2020, said Bai Chongen, a Tsinghua University professor and member of the central bank monetary policy committee.
In a research note, Bloomberg’s Tom Orlik and Fielding Chen said China’s 2016 GDP growth target is “still ambitious” and “testing but achievable”.
Buoyed by healthy wage gains, consumer spending has proven resilient so far to the slowdown in old growth drivers like manufacturing and housing investment, helping underpin the world’s second-largest economy.
In a wide-ranging speech lasting almost two hours, Li said Beijing will “oppose separatist activities” in Taiwan, the self-ruled island China claims as part of its territory.
Last week, Moody’s Investors Service cut its outlook on China’s government credit rating from stable to negative, citing rising debt, capital outflows and “uncertainty about the authorities’ capacity to implement reforms”. The country will seek to “strengthen the military in all respects so that it is more revolutionary, modern, and standardised”, the budget report said.
“The longer the Chinese economy continues to add debt, the more risky we will perceive the situation to be”, said Andrew Colquhoun, head of Asia-Pacific sovereign rating at Fitch.
“The growth of government revenue is slowing down: the imbalance between revenue and expenditure is becoming more pronounced and there are risks and hidden dangers in local government debt”, the report said.
“[If it recurs], people would lose hope and confidence”, he said.
The draft called for the creation of more than 50 million new urban jobs, improvements to expressways and high-speed railways, and to have the science-and-technology sector make up 60% of economic growth. Manufacturers are slashing workers at the fastest rate since the financial crisis in 2009 and industrial profits are in decline.
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China’s top brass is pledging reforms and dispelling fears of a hard landing in key national meetings that started over the weekend, underscoring Beijing’s efforts to stabilize market sentiment and assert the Communist Party’s leadership.
