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China cuts its economic growth target to 6.5-7 percent China tries to reassure on economy, cuts growth target
(about 2 hours later)
BEIJING — China’s leadership cut this year’s growth target for its slowing economy to 6.5-7 percent and promised Saturday to open its oil and telecoms industries to private competitors as part of sweeping reforms aimed at boosting productivity and incomes. BEIJING — China’s leadership tried to quell anxiety about its slowing economy following financial turmoil and rising labor unrest as it cut its growth target Saturday and promised to open oil and telecoms industries to private competitors in sweeping industrial reforms.
The growth target, down from last year’s “about 7 percent” and less than half of 2007’s peak of 14.2 percent, was included in a work report delivered by Premier Li Keqiang to China’s national legislature in front of nearly 3,000 delegates gathered in the cavernous Great Hall of the People. Premier Li Keqiang (pronounced “Lee Kuh-chiang”) announced a growth target of 6.5 to 7 percent in a report to the national legislature on Beijing’s plans for the year. That was down from last year’s “about 7 percent” and reflects the ruling Communist Party’s marathon efforts to replace a worn-out model based on trade and investment with more self-sustaining growth driven by consumer spending.
Li, the top economic official, promised to press ahead with market-oriented reforms that will include opening the telecoms, petroleum and public utilities industries, though he failed to say whether foreign companies might be allowed in. He said private companies would receive the same treatment as state-owned enterprises in project approval, finance and tax policy. Li, the top economic official, warned China faces “more and tougher problems” including weak export demand. But he expressed confidence communist leaders can maintain stable growth.
“We must deepen reform across the board,” the premier said in a nationally televised speech. He said the market “must play a decisive role.” “China has laid a solid material foundation and its economy is hugely resilient,” the premier said in an address to nearly 3,000 delegates to the National People’s Congress. “As long as we work together as one to surmount all difficulties, we will definitely achieve the targets for economic and social development in 2016.”
The world’s second-largest economy has cooled steadily over the past five years as the ruling Communist Party tries to replace a worn-out model based on trade and investment with self-sustaining growth driven by domestic consumption. Growth in 2015 declined to a 25-year low of 6.9 percent and is forecast to drift lower this year. In Li’s broad-ranging speech, which listed accomplishments of the past year and priorities for the coming year, the premier also said that Beijing will “oppose separatist activities” in Taiwan, the self-ruled island Beijing claims as part of its territory. He announced no new initiatives following the January election of Taiwanese President Tsai Ying-wen, who takes office in May.
Plans call for transforming China into a middle-income economy with self-sustaining growth driven by consumer spending instead of investment, trade and heavy industry. That requires the ruling party to cut the dominance of state companies that dominate industries from banking and telecoms to oil and steel and give entrepreneurs a bigger role. A separate budget report released Saturday confirmed a 7.6 percent increase in military spending, which comes at a time of tension with China’s neighbors over disputed portions of the South China Sea.
The premier promised more measures to clean up China’s badly polluted air, water and soil and more spending on science and industrial research and development to create new technology and better-paid jobs.
Chinese leaders are struggling to reassure their public and global markets about their ability to steer the world’s second-largest economy following a plunge in stock prices and currency turmoil. Spreading protests by laid-off workers have fueled questions about whether Beijing can manage its ambitious economic transition.
The latest growth target is the minimum Chinese leaders say is required to achieve the official goal of doubling incomes per person from 2010 levels by 2020. Economists warn anything higher could set back reforms by forcing Beijing to prop up growth with more wasteful investment.
Last year’s economic growth declined to a 25-year low of 6.9 percent. Private sector forecasts suggest even achieving Li’s lower target will be a challenge. The International Monetary Fund expects this year’s growth to drift down to 6.3 percent.
The party’s reform plans require it to cut the dominance of state companies that dominate industries from banking and telecoms to oil and steel and give entrepreneurs a bigger role.
Li promised to open electric power, telecoms, transportation, oil, natural gas and municipal utilities to private competition, though he failed to say whether foreign companies might be allowed in. He said private companies would receive the same treatment as state-owned enterprises in project approval, finance and tax policy.
“We must deepen reform across the board,” the premier said. He said the market “must play a decisive role.”
Li promised to open service and manufacturing industries wider to foreign investors, though he gave no details. He promised regulations would be made “more fair, transparent and predictable” to attract investment. Business groups have complained Chinese regulators are hampering access to promising sectors in violation of its free-trading pledges.Li promised to open service and manufacturing industries wider to foreign investors, though he gave no details. He promised regulations would be made “more fair, transparent and predictable” to attract investment. Business groups have complained Chinese regulators are hampering access to promising sectors in violation of its free-trading pledges.
Much of China’s slowdown has been self-imposed as regulators clamped down on a building boom and nurtured retailing, tourism and other service industries. An unexpectedly sharp downturn over the past two years has raised the risk of politically dangerous job losses and prompted Beijing to shore up growth with mini-stimulus efforts.Much of China’s slowdown has been self-imposed as regulators clamped down on a building boom and nurtured retailing, tourism and other service industries. An unexpectedly sharp downturn over the past two years has raised the risk of politically dangerous job losses and prompted Beijing to shore up growth with mini-stimulus efforts.
Li also said China needs to fix its environmental problems, although he laid out few specifics, and promised more investment in science and research and development to lead the way to more advanced manufacturing and innovative technology. Widespread expectations, despite repeated official denials, that Beijing will weaken its yuan to boost exports that forecasters predict shrank by as much as 20 percent in February has driven an outflow of capital that spiked to a record $135 billion in December.
The latest growth target would be the minimum Chinese leaders have said is required to achieve the official goal of doubling incomes per person from 2010 levels by 2020. Economists warn anything higher could set back reforms by forcing Beijing to prop up growth with more wasteful investment. This 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.”
A Chinese deputy finance minister retorted that Moody’s was wrong and shortsighted in comments Friday reported by the government’s Xinhua News Agency.
Communist leaders have tried in recent years to shift public attention away from the growth target. They say their priority is jobs and so long as the economy generates enough they will accept slower growth.Communist leaders have tried in recent years to shift public attention away from the growth target. They say their priority is jobs and so long as the economy generates enough they will accept slower growth.
The slowdown and Beijing’s reforms have wiped out jobs in mining, steelmaking and other industries. The downturn and Beijing’s reforms have wiped out jobs in mining, steelmaking and other industries.
Retailing, e-commerce and other service industries are growing and absorbing some idled workers but others are struggling to find work. The government says the economy created 13 million new jobs last year but has not said how many were lost at the same time.Retailing, e-commerce and other service industries are growing and absorbing some idled workers but others are struggling to find work. The government says the economy created 13 million new jobs last year but has not said how many were lost at the same time.
The country needs to create more than 50 million new urban jobs during the five years through 2020, Li said. The China Labour Bulletin, a research group in Hong Kong, reported 2,606 labor disputes last year, nearly twice as many as 2014’s 1,379.
The premier pledged to accelerate “supply-side reform,” or the painful process of shrinking bloated industries from steel to cement to aluminum in which supply exceeds demand. The premier pledged to boost consumption in areas such as elder care and health services and to link traditional businesses to the Internet. China has the biggest population of Internet users and investors are pouring billions of dollars into developing online and smartphone-based ventures for food delivery, movie ticketing, travel and other services.
That glut has led to price-cutting wars that are driving companies into bankruptcy. Steel producers have responded by exporting their surplus, prompting complaints by China’s trading partners. The government hopes such services can help propel consumption that grew to 44.5 percent of the economy last year from 2014’s 36.8 percent.
Li said Beijing will promote mergers and shut down “zombie enterprises” — the Chinese term for companies that are kept afloat by cheap loans from state banks. The premier said targets will include the coal and steel industries, for which plans already were announced in February, but didn’t give details of other sectors that will be affected. Li said the government hopes to generate at least 10 million new jobs this year as part of plans to create 50 million in the five years through 2020.
The government said this week it expects to eliminate 1.8 million coal mining jobs — about 17 percent of the industry’s workforce. The premier pledged to accelerate “supply-side reform,” or the painful process of shrinking bloated industries from steel to cement and aluminum. That glut has led to price-cutting wars that are driving companies into bankruptcy. Steel producers have responded by exporting their surplus, prompting complaints by China’s trading partners.
Even that sharp reduction is too small to bring coal supply in line with slack demand, according to JP Morgan analysts. They said that is likely to cause coal prices to plummet another 10 percent this year, worsening the struggle for financial strapped miners. Li said Beijing will promote mergers and shut down “zombie enterprises” — companies that are kept afloat by cheap loans from state banks.
Li warned that China will “more and tougher challenges” this year including weak export demand. The premier said targets will include the coal and steel industries, for which plans already were announced in February, but didn’t give details of other sectors that will be affected.
Manufacturing weakened in February and trade figures due out Tuesday are expected to show a contraction in exports accelerated, with shipments of Chinese goods falling by up to 20 percent from a year ago.
The latest government plan comes as Chinese leaders struggle to reassure their public and foreign investors growth is on track and they are in control following currency and stock market turmoil.
Widespread expectations, despite repeated official denials, that Beijing will weaken its yuan to boost sagging exports has driven an outflow of capital that spiked to a record $135 billion December.
This week, Moody’s Investors Service cut its outlook on China’s credit rating from stable to negative. The agency cited rising debt, capital outflows and “uncertainty about the authorities’ capacity to implement reforms.”
In a reflection of official sensitivity, a Chinese deputy finance minister on Friday retorted that Western models don’t apply to China.
“This approach is shortsighted,” said the official, Zhu Guangyao, according to the government’s Xinhua News Agency. “Practice will prove their decision to lower China’s credit rating was wrong.”
Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.