The Chinese government abandoned its
decades-long practice of setting an annual target for economic
growth amid the storm of uncertainty unleashed by the
coronavirus pandemic, and said it would continue to increase
stimulus.
Speaking at the National People’s Congress in Beijing on
Friday morning, Premier Li Keqiang delivered an annual policy
address that instead laid out a renewed focus on maintaining
employment and investment. Against a backdrop of escalating
tensions with the U.S., Li said Beijing remains committed to
implementing the terms of the ‘phase one’ trade deal.
With more than $500 billion in infrastructure bonds to be
issued this year and more monetary easing on the horizon, China
is trying to cement a fragile domestic recovery without
indulging in the kind of debt blowouts seen in the U.S. and
Europe. The world’s largest exporter is therefore still reliant
on other countries reining in the pandemic and a reboot of
global trade.
“We have not set a specific target for economic growth this
year,” Li said, speaking in the Great Hall of the People. “This
is 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.”
The shifting away from a hard target for output growth
breaks with decades of Communist Party planning habits and is an
admission of the deep rupture that the disease has caused.
Economists surveyed by Bloomberg see an expansion of just 1.8%
this year, the worst performance since the 1970s.
At the same time, Li gave a precise figure for the targeted
budget deficit, widening it to more than 3.6% of gross domestic
product. Including the issuance of special bonds, that brings a
broader measure of the deficit to more than 8%, according to
Bloomberg Economics.
Li’s address also contained announcement of plans to impose
a national security law in Hong Kong, a development that pushed
stocks there lower. The yuan was steady while the details on
bond issuance helped drive yields on benchmark Chinese 10-year
government bonds down to 2.625%, heading for the lowest in two
weeks.
(bloomberg)