China sets a “low bar” for GDP growth and promises more jobs

BEIJING (Reuters) – China set a modest annual economic growth target of more than 6% on Friday and pledged to create more jobs in cities than last year as the world’s second-largest economy planned a course careful from a year disrupted by COVID-19.

In 2020, China lowered its goal of raising gross domestic product from the prime minister’s employment report for the first time since 2002 after the pandemic devastated its economy. China’s GDP expanded by 2.3% last year, the weakest in 44 years, 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 working report in 2021. “In setting this goal, we have taken into account the recovery in economic activity.”

But the 2021 target was significant under analysts’ consensus, with growth expected to exceed 8% this year. Chinese stocks fell.

China’s conservative growth target reflects a public effort to demonstrate a return to economic stability after last year’s COVID-19 riots, political advisers said, while maintaining an appetite for debt and risk.

“It is obvious that this year’s growth will exceed 6%. The goal is to tell people that we should focus on high-quality growth, “Yao Jingyuan, a Chinese cabinet adviser, told Reuters.

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

Premier Li pledged to boost domestic consumption and innovation as part of a plan to reduce dependence on overseas markets and technologies for long-term development.

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

“The target should be a bottom line. We should have more room to promote difficult reforms, “said Xu Hongcai, deputy director of the economic policy commission at the Chinese Political Science Association.

In 2021, China will aim to create more than 11 million new urban jobs, Li said in his report presented at the opening of this year’s parliamentary meeting, compared to last year’s goal of more than 9 million and in line with recent years .

“SERIOUS LAW”

The government is targeting a budget deficit in 2021 of about 3.2% of GDP, less than a target of more than 3.6% last year, although it provides room to finance infrastructure and support small businesses.

Iris Pang, chief economist for Greater China at ING, said the continuation of the fiscal latitude is a more significant target than the growth target.

“The very low GDP growth target is as if it doesn’t exist at all, because the consensus is 8%, and my forecasts are 7%,” Pang told Reuters.

“I believe that most of the money will be used for research and technological development and will continue to provide a buffer for job stability only if COVID has a return,” she added.

The local government’s bond issue was set at 3.65 trillion yuan ($ 563.65 billion), down from 3.75 trillion yuan last year.

China has no plans to issue special treasury bonds this year, after issuing such bonds for the first time in 2020 to support the economy.

The outlook for this year’s government revenue and expenditure is “quite serious”, given the modest availability of funds as spending grows, China said in its annual budget report, also released on Friday.

The government has set its 2021 target for consumer price inflation at around 3%. Consumer prices rose by 2.5% annually last year, exceeding the target of about 3.5%.

In a five-year plan released separately on Friday, China has omitted any GDP growth target for 2021-2025 – as opposed to the 6.5% set for the 2016-2020 plan – but said it will maintain its average annual growth over the next five years within a “reasonable” interval.

The annual increase in disposable income per capita over the next five years will be “in line with GDP growth”, compared to a 2016-20 target of over 6.5%, according to the plan.

There was also no target for job creation in the next five years, although the government said the urban unemployment rate would be kept below 5.5%.

(1 USD = 6,4756 Chinese Yuan)