China is targeting at least 6 per cent growth this year, reflecting the government’s confidence in the wake of its successful containment of the coronavirus pandemic in the world’s second-largest economy.
Premier Li Keqiang unveiled the goal at the National People’s Congress, the annual meeting of the country’s rubber-stamp parliament in Beijing. Delegates at this year’s week-long session will also tighten the noose on Hong Kong’s pro-democracy movement, approve a 6.8 per cent rise in military spending and formally pass a new five-year economic plan focused on “self-reliance” in critical technologies.
“Facing the adverse and severe impact of a sudden coronavirus epidemic and a deep global economic recession, we the Chinese people . . . responded with tremendous tenacity,” Li said, hailing China’s recovery from an “extraordinary” year.
The announcement briefly boosted Asian equities before stocks fell back, with economists saying the target was relatively modest compared with recent years.
Analysts were divided on whether the government would reveal a target of about 6 per cent — or ditch setting one entirely, as it did last year because of the uncertainty stemming from the coronavirus pandemic. China’s annual growth targets have been criticised for leading to wasteful spending.
“The Chinese economy should very easily coast to the target growth rate,” said Jeremy Stevens, chief China economist at Standard Bank. “Eight per cent is more plausible.”
This year’s NPC session will also finish the work it began last year with the surprise passage of a national security law for Hong Kong that has been used to snuff out dissent in the territory.
Delegates will pass a contentious election law designed to reduce further the representation of Hong Kong democracy activists in the territory’s pro-Beijing legislature and other local bodies. Wang Chen, an NPC vice-chairman, said on Friday that Hong Kong’s electoral system had “loopholes and deficiencies” that could allow “anti-China forces” to seize control in the city.
This week Hong Kong authorities rounded up dozens of pro-democracy activists for alleged subversion, which under the national security law can be punishable by up to life in prison. “They want absolute control,” said Ho-Fung Hung, a China scholar at Johns Hopkins University.
Despite its growing confidence, Beijing remains wary of rising debt levels, which surged in the wake of the 2008-09 global financial crisis, and intensifying competition with the US. China’s debt-to-GDP ratio rose sharply to 270 per cent last year, undermining its success in stabilising the figure at about 250 per cent.
“The authorities are determined to deleverage the economy and de-risk the financial system,” said Diana Choyleva at Enodo Economics. “The coronavirus has undone the gradual but good work of the previous couple of years in pursuit of these goals.”
This year’s 6.8 per cent increase in defence spending, to Rmb1.36tn ($210bn) for 2021, surpassed last year’s rise of 6.6 per cent. Ni Lexiong, a military analyst, said that deteriorating ties with the US had created “drastic changes” in China’s external security concerns, making it impossible to cut military expenditure.
The five-year plan also aims to increase R&D spending by at least 7 per cent each year through 2025, to reduce China’s reliance on US companies for semiconductors and other technologies.
Li added that the government wanted to create at least 11m urban jobs, noting that despite the challenges posed by the pandemic, which caused the first year-on-year decline in economic output in decades at the start of 2020, 11.9m urban jobs were created last year. Growth also rebounded strongly, with the economy expanding 2.3 per cent for 2020.
In the run-up to this year’s parliamentary session, some officials and analysts had urged the government against setting an official growth target.
Most economists believe that Beijing will comfortably exceed its growth target, given last year’s low base.
Analysts at the Mercator Institute for China Studies, a Berlin-based think-tank, estimated that the economy would grow at least 6.8 per cent, based on provincial growth targets issued this year. The quota for local government bond issuance — an important driver for investment — will be reduced only slightly to Rmb3.65tn.
In addition to its technology, China’s next five-year plan will be scrutinised for details of how Beijing plans to achieve President Xi Jinping’s ambitious climate goals of achieving peak carbon dioxide emissions before 2030 and net-zero emissions by 2060.
Despite high expectations, Li confirmed little other than that a plan to reach peak emissions by 2030 would be completed this year. One important mark for 2025, a targeted ratio of carbon dioxide emissions intensity per unit of GDP growth, was set at 18 per cent — the same level as in the last five-year plan.
Li Shuo, a Beijing-based campaigner for Greenpeace East Asia, said the 18 per cent target sent an “indecisive signal. We were hoping for more answers on climate issues, but what we got are more questions.”
Additional reporting by Xinning Liu in Beijing and Primrose Riordan and Nicolle Liu in Hong Kong
Source: Economy - ft.com
