BEIJING – Chinese leaders have said they are targeting gross domestic product growth of 6% or more this year, a relatively modest target that nonetheless indicates continued optimism after a year in which the coronavirus singled out the world economy.
The target, announced by Beijing Premier Li Keqiang, is comfortably lower than most economists’ expectation that the world’s second largest economy will grow by 8% or more this year.
Nevertheless, many economists predicted that Beijing would abandon the numerical target altogether, as it did last year for the first time since 1994, conceding to the uncertainty of the Covid-19 pandemic.
The Chinese economy recovered relatively quickly from the initial outbreak centered in the Chinese city of Wuhan, eventually growing by 2.3% for the year. It was the only major world economy to grow in 2020.
As the momentum of growth is now at the level of the virus, Beijing policymakers have indicated that they intend to gradually withdraw stimulus measures and instead concentrate on getting out of debt and fending off an emerging bubble in the real estate market.
Mr. Li said in the annual report on Friday that the government will try to reduce the fiscal deficit target to 3.2% of China’s projected GDP this year, compared to a target of more than 3.6% in 2020.
Beijing also plans to reduce the amount of debt that local governments may take up, so that by 2021, locals will issue 3.65 billion yuan, equivalent to $ 580 billion, to special effects of local government of the 3.75 billion yuan which was earmarked last year. The connection stems mainly from the financing of infrastructure projects.
Li said China is aiming to keep consumer price inflation at around 3% in 2021, compared to the target of 3.5% last year and its real rise of 2.5%.
The government has also said it plans to create 11 million new jobs this year, up from the 2020 target of 9 million. It was also aimed at limiting the unemployment rate in urban areas to 5.5% in 2021, compared to a ceiling of 6% in 2020.
Beijing said the defense budget would increase by 6.8% in 2021, compared to an increase of 6.6% last year.
The government’s targets were announced during the opening of the annual session of the Chinese legislature, the National People’s Congress, in the Great Hall of the People in Beijing.
Friday’s meeting also unveiled a draft blueprint of China’s 14th five-year plan, covering 2021-25, as well as broad guidelines that will shape China’s growth model over the next decade and a half.
In their five-year plan, Chinese leaders violated the agreement by not giving an average numerical growth target, only saying they would intend to keep the economy ‘within a reasonable range’. In the 2016-20 plan, the target was ‘more than 6.5%’.
Chinese Prime Minister Li Keqiang set out the country’s economic goals during the opening session of the National People’s Congress in Beijing on Friday.
Photo:
roman pilipey / Shutterstock
Legislators will review the blueprint during the weekly legislative session, according to the official agenda.
Instead of a five-year GDP target, Beijing leaders said they aim to limit the surveyed urban unemployment rate to 5.5%, with a growth in labor productivity exceeding total GDP growth. It is also planned to increase the country’s urbanization rate to 65%, from 60.6% in 2019.
As Beijing’s emphasis on encouraging consumer spending reflects – given concerns that rising geopolitical tensions could hurt export demand – officials said the disposable income of Chinese residents should keep pace with the country’s overall economic growth over the five years.
And underlining the growing importance China’s leaders attach to science and technology, total research and development spending over the five years will grow by more than 7% annually, they said.
China’s leaders also discussed the importance of supply chains and leading-edge technologies, including the pursuit of artificial intelligence, semiconductors, blockchain and next-generation 6G wireless networks.
The plan also promised to keep the share in manufacturing ‘basically stable’ during the period 2021-25.
Mr. Li said that by 2025, China aims to reduce carbon dioxide emissions per unit GDP by 18% from 2020 levels, the same rate as in the previous five-year plan, which China exceeded by reaching a reduction of 18.6%. It aims to reduce energy consumption per unit GDP by 13.5%.
The government is also facing social and fiscal pressures due to a rapidly aging population and plans to increase the legal retirement age in a phased manner and revive a long but unpopular proposal.
The proposal was mentioned without details in the five-year plan. Men can currently retire at 60, and female factory workers as early as 50. Female workers in the public sector and white-collar workers can retire at 55.
The draft plan aims to increase China’s average life expectancy by one year over the next five years. According to the National Health Commission, in 2019 it was 77.3 years.
With the economy back on track, policymakers in China have also signaled a shift in focus to weakening financial risks and debt levels. Mr. Li said the government will keep China’s overall leverage ratio stable in 2021 while tightening regulation of financial conglomerates and financial technology companies.
Beijing also aims to keep the growth in money supply and total social financing at the same level as economic growth. The Prime Minister called on the country’s largest commercial banks to maintain lending growth of at least 30% to small businesses and to extend lending relief to small business lenders hit hard by the pandemic.
The government has also said it will keep export and import volumes stable this year, increase bank lending to the manufacturing sector and increase investment in the sector’s equipment upgrades.
China’s fiscal budget for 2021 forecast growth in annual revenues and expenditures of 8.1% and 1.8% respectively.
—Grace Zhu, Bingyan Wang, Chun Han Wong, Liyan Qi, and Sha Hua contributed to this article.
Write to Jonathan Cheng by [email protected]
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