Gone are the days of double-digit growth in China, with official targets always far exceeded.
That was the message delivered on March 5th by the prime minister, Li Keqiang, at the opening of the annual session of the National People’s Congress, the country’s rubber-stamp parliament.
Mr Li called for growth of “about 7%” this year. At 7.4%, last year’s growth was already the slowest in nearly a quarter-century. He said the slowdown was what the government had expected as it tries to build a steadier, stronger economy. But the going will be tough.
In his address to nearly 3,000 delegates in Beijing’s Great Hall of the People, Mr Li said economic difficulties in the year ahead “may be even more formidable” than in 2014. “Downward pressure”, he said, was intensifying. But he also used a phrase that has in recent months become a mantra for Chinese officials: slower growth, he said, was the “new normal”.
His speech was peppered with calls for further economic reform, despite the complaints of industries hit by closures and job losses. Mr Li spoke several times of the need to reduce the power and meddling of government. He tossed in a term popular among China’s playful netizens, renxing, which means doing whatever you want: “It goes without saying, having power doesn’t mean you can renxing”.
This touch was his best line: delegates chuckled appreciatively. But Mr Li clearly meant it seriously, as a warning to officials and bosses of state-owned enterprises not to obstruct reforms.
Many will have got that message already from a vigorous anti-corruption campaign, which began more than two years ago and, unlike the economy, shows no sign of a slowdown. Among its targets are 39 legislators, who have either resigned or been dismissed.
“Our tough stance on corruption is here to stay,” Mr Li said. On March 2nd the army published the names of 14 generals who have been punished for corruption or are under investigation. But this has not dulled the government’s fervour for military spending, which continues to grow faster than the economy as a whole. Mr Li announced a 10.1% increase in the military budget, to $US144 billion, compared with a 12.2% increase last year.
State media describe the prime minister’s annual speech to the legislature as akin to an American president’s state-of-the-union address. The flavour is hardly the same, however–Mr Li’s nearly 100-minute oration was as usual, larded with dry statistics and, barring renxing, heavy with wooden language. He had no American-style partisan wisecracks to share with delegates, all of whom are hand-picked by the Communist Party and “elected” without a popular vote.
Mr Li told them that reforms of state-owned enterprises would continue, and that the government would allow more private and foreign investment in services, a sector long dominated by the state. He acknowledged one area of desperate need: more non-government nursing homes for the elderly, who face extremely long waiting lists for beds in state institutions.
Mr Li also repeated the government’s pledges to control smog and other forms of pollution. In last year’s speech he declared “war” on the problem, but public anxieties remain high. An independent documentary on the environment has aroused intense debate online recently.
But there is a number in the prime minister’s speech that will command the attention of everyone from village bosses to foreign investors: the one for economic growth. China’s formal growth targets used in effect to be irrelevant, with the economy handily outpacing them.
But as the economy has matured and slowed, they have emerged as much more important guides to the government’s bottom line. Last year, when GDP was at risk of slipping too far below the target, officials sped up public spending plans and loosened monetary policy, which allowed growth to come in only slightly short of the goal of 7.5%.
The lower target for this year is an explicit recognition that the economy faces stronger headwinds. But it is also a way for the government to give itself extra slack to pursue much-needed reforms. These are aimed at shifting from heavy reliance on investment and credit, towards more consumption-led growth.
With regulators tightening the credit flow to both municipalities and companies, many in China had hoped the central government would ease the pain by taking on more spending burdens itself. In the event, it widened its deficit target for 2015 to 2.3% of GDP, up just a touch from last year’s 2.1%. If China is really to hit its target of 7% growth, the central government may yet need to provide a bigger fiscal boost.
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