BEIJING: China on Friday (Mar 5) set a modest annual economic growth target, at above 6 per cent, and pledged to create more jobs in cities than last year, as the world’s second-biggest economy planned a careful course out of a year disrupted by the effects of COVID-19.
In 2020, China dropped a gross domestic product growth target from the premier’s work report for the first time since 2002 after the pandemic devastated its economy.
China’s GDP expanded 2.3 per cent last year, the weakest in 44 years but making it the only major economy to report growth.
“As a general target, China’s growth rate has been set at over 6 per cent for this year,” Premier Li Keqiang said in his 2021 work report. “In setting this target, we have taken into account the recovery of economic activity.”
But the 2021 target was significantly below the consensus of analysts, who expect growth could beat 8 per cent this year. Chinese shares fell.
“If sequential growth averages zero from Q1 to Q4 this year, we will get around 6.1 per cent annual growth this year,” Nomura said in a note.
Aninda Mitra, senior sovereign analyst at BNY Mellon Investment Management, said the modest growth target will allow the authorities to emphasise the quality of growth rather than its quantity.
“In the aftermath of the pandemic, a low bar should allow most provinces to cross the hurdle without over-stretching themselves financially,” Mitra said.
In 2021, China will target the creation of more than 11 million new urban jobs, Li said in his report delivered at the opening of this year’s meeting of parliament.
That is up from a goal of more than 9 million new urban jobs last year, and in line with recent years.
“QUITE GRAVE”
The government is targeting a 2021 budget deficit of around 3.2 per cent of GDP, less than a goal of above 3.6 per cent last year, though giving room for substantial expenditure.
“The very low GDP growth target is like there is no target at all because the consensus is 8 per cent and my forecast is 7 per cent,” said Iris Pang, chief economist for Greater China at ING.
“I would rather look at other numbers, for example the fiscal deficit at 3.2 per cent of GDP, which tells a lot,” Pang told Reuters.
“It means the government is going to spend a lot of money even with an economic recovery. I believe that most of the money will be used for technology R&D and continue to provide some buffer for job stability just in case COVID will have a comeback.”
The quota on local government special bond issuance was set at 3.65 trillion yuan (US$563.65 billion), down from 3.75 trillion yuan last year.
China also has no plan to issue special treasury bonds this year, after issuing such bonds for the first time in 2020 to support the virus-hit economy.
The outlook for government revenue and expenditure this year is “quite grave”, it said in its annual budget report, also released on Friday.
The government set its 2021 target for consumer price inflation at around 3 per cent, compared with a target of around 3.5 per cent last year. The actual CPI last year undershot the goal, rising just 2.5 per cent.
FIVE-YEAR UNCERTAINTIES
In a five-year plan released separately on Friday, China did not set any GDP growth target for 2021 to 2025, compared with a goal of over 6.5 per cent in the 2016 to 2020 plan.
China will keep its average annual economic growth rate over the next five years within a “reasonable” range, the government said.
The annual growth rate in disposable income per capita over the next five years will be “in line with GDP growth”, compared with a 2016 to 2020 goal of over 6.5 per cent, according to the plan.
There was also no target for job creation over the next five years, though the government said China’s urban survey-based jobless rate will be kept under 5.5 per cent.
In the previous five-year plan, China aimed to increase the number of urban jobs by 50 million.
However, China plans to increase its annual research and development spending by more than 7 per cent every year until 2025, highlighting its commitment to advancing in the tech sector as the country clashes with the United States and other countries over technology policy.
