China cuts GDP target to 6.5 pct amid continued economic woes

By: | Updated: March 5, 2016 7:32 PM

China today lowered its GDP target to 6.5-7 per cent this year with Premier Le Keqiang warning that the world's second-largest economy will face tougher problems in future and must be prepared to fight a "difficult battle".

china economyChina grew by 67.7 trillion yuan in 2015. (Reuters)

China today lowered its GDP target to 6.5-7 per cent this year with Premier Le Keqiang warning that the world’s second-largest economy will face tougher problems in future and must be prepared to fight a “difficult battle”.

China’s woes over a slowing economy were reflected in its growth prospects as it lowered the GDP target, acknowledging that downward pressures may affect employment scenario and personal incomes.

The economy, which grew 6.9 per cent last year, however remained within “an appropriate range,” Premier Li Keqiang said in his work report submitted to the annual session, the National People’s Congress (NPC), which opened here today.

“China will face more and tougher problems and challenges in its development this year, so we must be fully prepared to fight a difficult battle,” Li said.

“Downward pressure on the economy is growing,” Li said. “Domestically, problems and risks that have been building up over the years are becoming more evident.”

China grew by 67.7 trillion yuan in 2015.

In dollar terms it was about $ 10.4 trillion, marginally above the over $ 10 trillion in 2014 due to steady depreciation of the Chinese currency against US dollar.

Presenting his report before 3,000 lawmakers of the NPC, often described as a rubber-stamp parliament for its routine approval to the decisions of the ruling Communist Party of China (CPC), Li said the target for this year is set at 6.5 per cent to 7 per cent.

Chinese President Xi Jinping earlier directed officials to ensure that the GDP should not go below 6.5 per cent, amid fears that the economy may be heading for a “hard-landing.”

While Li read his report, a report on the implementation of the draft five-year plan submitted to NPC by the National Development and Reforms Commission – which is akin to India’s NITI Aayog – painted a grim picture about the consequences of the slowdown.

“The slowdown in the growth of the demand is continuing. With international demand remaining weak, the situation in relation to the foreign trade has become more challenging and complex. As downward pressure China’s economy begins to affect employment and personnel incomes, it may also spread to affect private consumption,” it said.

The declining profits in some industries and losses in others increased the number of industrial firms facing difficulties resulting in layoffs and hidden unemployment pressures within the enterprises and industries, it said.

“The growth of government revenue is slowing down: the imbalance between revenue and expenditure is becoming more pronounced and there are risks and hidden dangers in local government debt,” the report said.
The local government debt was unofficially stated to be more than $ 1.8 trillion.

The report said that “the amount of non-performing loans reported by banks have increased. The debt-ratio enterprises is also rising.”

“We must attach great importance to these issues, carry out full evaluation of of the difficulties and challenges that have arisen as a result of the downward pressure on the economy,” it said.

Li said that in 2015 China’s grain production grew for the 12th year in a row. Consumer price index, a main gauge of inflation, increased 1.4 per cent year- on-year, a six-year low and well below the 3-per cent target.

Amid reports that five to six million workers faced layoffs due to the slowdown, Li’s report said the employment situation was “stable.”

Officials said over 1.8 millions workers faced retrenchment in coal and steel sectors. The 2.3-million-strong military too announced three lakh troop cut this year.

“Of particular note, the employment situation overall remained stable, with 13.12 million new urban jobs created in 2015, surpassing the year’ s target and becoming an economic highlight,” Li said.

He said despite the slowdown government has successfully fulfilled all main tasks and targets set out in an economic and social development road-map for the 2011-2015 period.

The NPC session, which was opened with lot of fanfare with a number of ethnic minorities turning up in colourful dresses, was being covered by over 3,500 journalists, over 1,000 from foreign countries.

Xi, along with members of the Standing Committee – the highest body of the CPC, attended the session telecast live.

Striking an optimistic tone, Li said China has made impressive achievements in its development in the 12th Five-Year Plan period, defying a “complicated international environment” and “challenging tasks of carrying out reform and development and maintaining stability at home.”

In particular, China has sustained a high rate of economic growth in the five years and secured milestone progress in structural adjustments, he said.

China’s GDP grew at an average annual rate of 7.8 per cent in the five years between 2011 and 2015.
The enviable growth made China the world’s second-largest economy, and the largest trading nation in terms of goods as well as a major outbound investor, Li said.

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