Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

China sets 'low bar' for GDP growth, pledges more jobs

Published 03/04/2021, 08:25 PM
Updated 03/05/2021, 01:35 AM
© Reuters. General view shows the traffic during the evening rush hour in Beijing
USD/CNY
-
BK
-

By Stella Qiu and Kevin Yao

BEIJING (Reuters) - China on Friday set a modest annual economic growth target, at above 6%, 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 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% 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% 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% this year. Chinese shares fell.

China's conservative growth target reflects a public effort to demonstrate a return to economic stability after last year's COVID-19 upheaval, policy advisers said, while also keeping a lid on appetite for debt and risk.

"It's obvious this year's growth will be over 6%. The purpose is to tell people that we should focus on higher quality growth," Yao Jingyuan, an adviser to China’s cabinet, told Reuters.

While the low GDP target does not mean the government will rush to tighten policy, with many parts of the economy still struggling, it will give planners more room to push reforms.

Premier Li pledged to spur domestic consumption and innovation, as part of a plan to reduce reliance on overseas markets and technology for long-term development.

As such, China plans to boost annual research and development spending by more than 7% every year until 2025. [L2N2L304E]

"The target should be a bottom line. We should have more room for pushing forward difficult reforms," said Xu Hongcai, deputy director of the economic policy commission at China Association of Policy Science.

In 2021, China will aim to create more than 11 million new urban jobs, Li said in his report delivered at the opening of this year's meeting of parliament, up from last year's goal of over 9 million and in line with recent years.

'QUITE GRAVE'

The government is targeting a 2021 budget deficit of around 3.2% of GDP, less than a goal of above 3.6% last year, though giving room to fund infrastructure and aid small firms.

Iris Pang, chief economist for Greater China at ING, said continued fiscal latitude was a more meaningful target than the growth target.

"The very low GDP growth target is like there is no target at all because the consensus is 8% and my forecast is 7%," Pang told Reuters.

"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," she added.

The quota on local government special bond issuance was set at 3.65 trillion yuan ($563.65 billion), down from 3.75 trillion yuan last year.

China also has no plan to issue special treasury bonds this year, having issued such bonds for the first time in 2020 to support the economy.

The outlook for government revenue and expenditure this year is "quite grave" given the modest availability of funds as spending rises, China said in its annual budget report, also released on Friday.

The government set its 2021 target for consumer price inflation at around 3%. Consumer prices rose an annual 2.5% last year, undershooting a target of around 3.5%.

In a five-year plan released separately on Friday, China omitted any GDP growth target for 2021-2025--in contrast to the 6.5% set for the 2016-2020 plan--but it said it would keep its average annual growth over the next five years in a "reasonable" range.

Annual growth in disposable income per capita over the next five years will be "in line with GDP growth", compared with a 2016-20 goal of over 6.5%, according to the plan.

There was also no target for job creation over the next five years, though the government said the urban jobless rate will be kept under 5.5%.

© Reuters. General view shows the traffic during the evening rush hour in Beijing

($1 = 6.4756 Chinese yuan)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.