China targets slower economic growth as headwinds gather

China on Saturday targeted slower economic growth of around 5.5 per cent this year as headwinds including an uncertain global recovery and a downturn in the country’s vast property sector cast a pall on the world’s second-largest economy.

As economic conditions soften, the central bank has started cutting interest rates, local governments have expedited infrastructure spending and the finance ministry has pledged more tax cuts.

There were few surprises in Premier Li Keqiang’s annual work report to the annual session of parliament, as China puts a premium on stability in a politically sensitive year during which President Xi Jinping is expected to secure a precedent-breaking third leadership term in the autumn.

“We must make economic stability our top priority,” Li told delegates gathered at the cavernous Great Hall of the People on the west side of Tiananmen Square.

Amid coronavirus curbs, this year’s parliamentary meeting will be the shortest ever at 6-1/2 days.

“The world economic recovery lacks drive, and commodity prices remain high and are prone to fluctuation. All of this is making our external environment increasingly volatile, grave and uncertain,” Li said.

While the government vowed to ensure supply of key agricultural products including grains, the agriculture minister said on the sidelines of parliament China’s current wheat crop-growing condition could be the worst in history.

Li said that maintaining steady export growth is getting harder, and supply of energy and raw materials remains inadequate.

Also weighing on the economy is a property downturn triggered by a government campaign to control borrowing among highly indebted developers. An ensuing tightening in liquidity squeezed the sector and chilled buyer sentiment.

Still, China left its consumer price index target unchanged at around three per cent.

Last year, China’s gross domestic product grew 8.1 per cent, beating the government’s target of over six per cent, helped by robust exports to economies hit by Covid-19 and a low statistical base in 2020, when the pandemic began to spread worldwide.

Some analysts said this year’s goal is tougher to reach.

“It may be a bit difficult to achieve the target, and we need to take some measures to achieve it,” said Zong Liang, chief researcher at Bank of China.

‘OVERSEAS RISKS’

While investing abroad under China’s Belt and Road initiative, China must guard against “overseas risks”, Li said, in contrast to his push last year for outbound investment and cooperation.

The budget deficit ratio was lowered to boost fiscal sustainability, Finance Minister Liu Kun said on the sidelines of parliament. — Reuters