BEIJING: China lowered its 2015 economic growth target to “approximately 7 percent” Thursday, scaling down expectations in the face of “formidable” difficulties for the world’s second-largest economy after its decades-long boom.
The figure announced by Premier Li Keqiang is the lowest since a similar goal in 2004 and comes after China’s gross domestic product (GDP) expanded 7.4 percent in 2014, the slowest pace in 24 years. Last year’s target was “about 7.5 percent.”
The cut was widely expected by economists and reflects the reality of a multi-year slowdown in the Asian giant that has seen it come off regular annual double-digit expansions.
Beijing also reduced multiple other targets including trade growth and inflation.
“With downward pressure on China’s economy building and deep-seated problems in development surfacing, the difficulties we are to encounter in the year ahead may be even more formidable than those of last year,” Li told the opening of the annual National People’s Congress (NPC), the country’s Communist-controlled legislature.
China’s leaders have traditionally pegged the GDP goal at an easily achieved level, and the objective is usually approximated to provide room for positive spin just in case.
Last year’s 7.4 percent result marked the first time since 1998 —during the Asian financial crisis—that the target figure was missed.
The leadership has proclaimed a new era of slower expansion and emphasis on further economic reforms, and the 2015 growth goal matches the median forecast for annual GDP expansion in a January Agence France-Presse survey of 15 economists.
“The lower growth target, in our opinion, reflects the government’s awareness of an economic ‘new normal’—of slower growth and the urgent need for structural reform,” Nomura economists said after Li’s speech.
They pointed to cuts in other 2015 growth targets, including fixed asset investment and retail sales, as “all supporting the idea that the government clearly recognizes the growth slowdown.”
The “new normal” phrase is leaders’ favored description of the present reality and Li used it in his address to serried ranks of delegates in Beijing’s Great Hall of the People.
“It is like a man’s height that can’t grow higher forever,” Alibaba founder Jack Ma said, according to the official news agency Xinhua, adding that China “can’t and shouldn’t” pursue the growth speeds of the past.
Li told NPC delegates that the two-way trade growth target for 2015 was set at “around 6 percent,” down from last year’s 7.5 percent. China missed the goal in 2014 for the third consecutive year owing to soft domestic and foreign demand, expanding just 3.4 percent.
The consumer inflation target was also lowered to “around three percent,” Li said, after it plunged to a more than five-year low of 0.8 percent in January, fuelling fears the economy is on the brink of a deflationary spiral. Consumer prices rose 2.0 percent last year.
China’s weakening economy prompted authorities to cut interest rates in November and at the weekend.
The National Development and Reform Commission, the top economic planning agency, cut the target for fixed asset investment growth to 15.0 percent from 17.5 percent, and retail sales to 13.0 percent from 14.5 percent, its report to the NPC showed.
A fresh double-digit spending boost for the military was also announced, although the 10.1-percent increase was the lowest for five years.
China’s leaders are trying to pull off a delicate rebalancing of the economy, steering it away from past reliance on major—and hi.ghly leveraged—investment projects and towards one driven by consumer spending.
Slower growth is a welcome byproduct of the transformation, they say, and will result in a more sustainable economic model. Li has said repeatedly that weaker growth is no problem so long as the quality is high and job growth is strong.
China created 13.22 million new urban jobs last year, he said Thursday, improving on 2013’s figure, but he kept the 2015 target for urban job creation at “over 10 million.”
Ensuring enough jobs in China, the world’s most populous country, is a key task for the Communist Party, which touts its own success in lifting hundreds of millions of people out of poverty as a signature element of its right to rule.
In last year’s speech, Li also declared “war” on the country’s lethal pollution, which causes widespread public anger, but the subject was not as prominently emphasized this year.
“Environmental pollution is a blight on people’s quality of life and a trouble that weighs on their hearts,” he said. “We must fight it with all our might.”
Li said in his 34-page report—which took him more than an hour and a half to deliver—that China “will pursue prudent and balanced monetary policy” and pledged to “comprehensively deepen” reform, echoing regular vows.
He also announced a trial link between the Shenzhen and Hong Kong stock markets, following a similar scheme with Shanghai’s flagship bourse.
The benchmark Shanghai Composite Index closed 0.95 percent lower, but the Shenzhen Composite Index rose 0.27 percent.