BEIJING – China lowered its economic growth target this year to between 6% and 6.5%, bowing to a deepening slowdown that can’t be quickly arrested without aggravating debt levels that are already high.
Opening the annual session of China’s legislature on Tuesday, Premier Li Keqiang laid out plans to fend off risks in the economy and keep the nation’s jobless rate steady. Chief among the remedies to prop up growth: increasing deficit spending, launching new tax cuts and other fee reductions for businesses – totaling 2 trillion yuan, or 2% of China’s $13 trillion economy – and boosting bank lending to small and private companies by 30%.
Li nodded to the “uncertainties of the China-US trade friction” that weigh on growth and the negotiations for a resolution. The economic blueprint he delivered calls for giving foreign investors greater access to China’s markets and allowing foreign firms to enter more sectors without Chinese partners. A new foreign-investment law, he said, will level the playing field between foreign and domestic firms – a central demand of Washington’s.
China will engage more with the US, Li said in his nearly 100-minute speech to the roughly 3,000 delegates inside the Great Hall of the People, while adding: “We’ll fulfill our commitments and firmly defend our legitimate rights and interests.”
The 11-day session of the largely ceremonial National People’s Congress is generally a time for Communist Party leaders and officials to speak confidently about China’s prospects; Li’s speech is a kind of state-of-the-nation address.
This year’s event, however, takes place amid a challenging economic downturn that has been steeper than what Chinese leaders expected when the congress gathered a year ago. President Xi Jinping, China’s undisputed leader, has called for maintaining stability across the board in year a filled with politically sensitive anniversaries, including the 70th year of Communist Party rule and 30 years since the military crushed the Tiananmen Square protests.
Though still strong by many countries’ standards, China’s economic expansion weakened last year to 6.6%, its slowest pace by official reckoning in nearly three decades and just above the national target of around 6.5%. It is expected to slow further in 2019, some economists say, as main drivers of growth ranging from exports, investments and consumption all come under pressure.
By adopting a range for the growth target this year rather than a specific number, the leadership is giving itself more flexibility in a system where hitting stated goals remains politically important. The last time Beijing did so was during another period of flagging growth, in early 2016, when it set a target of 6.5% to 7%.
This downturn is being treated differently by the leadership than those of the recent past, as years of debt-fueled growth reach their limits. Policies over the past two years meant to halt a buildup of already high piles of debt among companies and local governments sapped some of the energy out of the economy, exacerbating the slowdown.
The pro-growth policies Li announced on Tuesday are in keeping with Beijing’s piecemeal approach in recent months to ease back on controls of credit and fiscal spending. The leadership has sworn off what it calls “flood-irrigation stimulus,” fearing that it could exacerbate imbalances in an economy already reeling from too much debt, industrial overcapacity and unsold homes.
A souring economy adds to the political risks that Xi warned Communist Party members about earlier this year, by potentially, for example, leading to more protests by unemployed migrant laborers or demobilized soldiers over benefits. In his address, Li promised to increase benefits and services for those groups – as well as pensioners – and vowed to improve medical care and insurance.
Chinese officials said that keeping growth in the 6% to 6.5% range sends a signal to the world that China will remain an engine of global growth and to ordinary Chinese that creating jobs remains a priority. “We will put employment first,” Li said.
Among the job-creation initiatives are an 800 billion yuan ($119 billion) investment in railway construction and 1.8 trillion yuan to build roads and waterway transportation.
More help is also being offered to companies to soften the impact of trade tensions with the US Affected companies will receive assistance to keep them from laying off workers, according to a separate report issued by the National Development and Reform Commission, the country’s top economic planning agency.
On other priorities, China’s military spending is slated to rise 7.5% to 1.19 trillion yuan, which is lower than last year’s 8.1% increase but still faster than the overall increase in government spending.
Also getting more money is a campaign to curb pollution – a goal of Xi’s government as it tries to meet middle class demands for improved living standards. This goal has been hard to attain. As the congress opened, Beijing was bathed in unhealthy levels of pollution for a fourth straight day on Tuesday.
Li also took aim at the bureaucracy that Xi has criticized for impeding their policies. Li called for reducing paperwork, meetings and “pointless formalities” and said the State Council, the government’s executive arm, will reduce the number of meetings it holds and the volume of documents it issues by more than a third.
“We should free government employees from the mountains of documents and endless meetings, from the superfluities surrounding evaluations and inspections, and from report writing and form filling-in, and instead spend our energy on solving real problems,” he said to applause.