China has abandoned setting a target for GDP growth for the first time in decades, citing “great uncertainty” caused by the coronavirus pandemic in an acknowledgement of its economic struggles.
Instead Beijing will “give priority to stabilising employment and ensuring living standards”, the premier, Li Keqiang, told the gathered members of the Chinese Communist party at the opening of the National People’s Congress in Beijing on Friday.
Li said his government was not setting a target this year “because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the covid-19 pandemic and the world economic and trade environment”.
While Li said the economy remained “stable overall”, the pandemic had caused China’s economic growth to shrink a staggering 6.8% in the first quarter, and was expected to drop more in the current quarter.
“The shock of the Covid-19 pandemic has sent the world economy into severe recession, disrupted industrial and supply chains, and caused a contraction in international trade and investment and volatility in commodity markets,” said Li.
“Domestically, consumption, investment, and exports have declined. Pressure on employment has risen significantly. Enterprises, especially micro, small, and medium businesses, face growing difficulties. There are increasing risks in the financial sector and other areas. The budgetary imbalances of primary-level governments have intensified.”
Before the pandemic, China was expected to report a 6% growth target, which would put it on track to meet its promise of doubling GDP from 2010 to 2020.
But instead the coronavirus pandemic has caused much greater economic damage than previously thought.
Li reported the deficit-to-GDP ratio this year was projected to exceed 3.6%, and the deficit to increase by 1 trillion yuan more than last year.
“Governments at all levels must truly tighten their belt,” he said.
Instead of GDP growth, Li announced other targets including a 3.5% increase in inflation, more than 9m new urban jobs and a registered urban unemployment rate of around 5.5%. The CCP will also aim for personal income growth in line with economic growth, and the elimination of poverty among all rural residents.
China will also issue 1 trillion yuan in special treasury bonds for the first time in 2020, which could be used to support businesses and regions affected by the pandemic, with subsidies to spur consumption or boost the capital structure of small banks, analysts told Reuters.
Local government bonds could be mainly used to fund infrastructure projects.
The speech was typically positive about the CCP’s progress over the past year, and praised China’s response to the pandemic, but said there was “still room for improvement in the work of government”.
“Pointless formalities and bureaucratism remain an acute issue. A small number of officials shirk their duties or are incapable of fulfilling them. Corruption is still a common problem in some fields.
“During the Covid-19 response, many weak links have been exposed in public health emergency management, and the people have expressed their views and suggestions, which deserve our attention. We must strive to improve our work and fulfill our responsibilities and make every effort to live up to the people’s expectations.”
source https://www.theguardian.com/world/2020/may/22/china-abandons-gdp-target-for-first-time-in-years-amid-great-uncertainty-of-virus
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