Economic growth and blue skies central themes in work report
March 6, 2017 Category NPC '& CPPCC sessions, Weekly
The National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) started their yearly sessions at the Great Hall of the People in Beijing on March 5 and March 3 respectively. China faces “far more complicated and graver situations” both at home and abroad as it steps up economic development and seeks to play a greater international role, Premier Li Keqiang said in his report to the 5th session of the 12th NPC.
China aims for an economic growth of about 6.5% this year “or higher if possible in practice”, according to the work report. The target compares with a 6.5% to 7% range in 2016 and an actual GDP growth of 6.7%. Premier Li also set the inflation target at 3%, unchanged from last year. China aims to create 11 million new urban jobs this year, more than last year’s 10 million. Steel capacity will be cut by 50 million tons and coal by 150 million tons this year. Li stressed repeatedly in his speech that his government’s top priority in 2017 would be to ensure the success of the upcoming Communist Party congress and to rally around President Xi Jinping’s core leadership. It was the first of 17 major tasks Li listed for 2017.
On the exchange rate, Li said the government would stick to market-oriented reform and maintain the Chinese currency’s importance in the global market. For the first time in an annual government report, the requirement to ensure the stable global status of the yuan was included as one of its major tasks, dropping the line “keeping a stable yuan at a reasonable and balanced level” that has been including in the report for the past three years. “The renminbi exchange rate will be further liberalized, and the currency’s stable position in the global monetary system will be maintained,” Premier Li told the National People’s Congress delegates. The new wording may indicate that Beijing will be more tolerant of yuan exchange rate moves against the dollar and gradually reduce its intervention in the foreign exchange market this year. Beijing’s efforts to make the yuan an international currency were largely shelved in the past year. In Hong Kong, the primary offshore yuan market, yuan deposits at the end of 2016 dropped 46% from a peak in December 2014.
Li Keqiang also said that “officials who do a poor job in enforcing the law, knowingly allow environmental violations, or respond inadequately to worsening air quality will be held accountable.” He to make the country’s smoggy skies blue again and “work faster” to address pollution caused by burning of coal for heat and electricity. Li said “people are desperately hoping for” faster progress to improve air quality. “We will make our skies blue again,” he declared to almost 3,000 delegates in the Great Hall of the People in Beijing.
China’s military budget will rise by around 7% this year, a bit more than projected GDP growth, and down from 7.6% last year. But for the first time in decades the government did not reveal total defense spending, an attempt to downplay the sensitive figure. The total military budget has long been included in the Ministry of Finance’s report but was omitted this year. The government deficit would be 3% of economic output, unchanged from last year, as stability remains the key and no new major economic initiatives are planned. In infrastructure, China will pump CNY800 billion into new railways, CNY1.8 trillion into roads and waterways and begin 15 major hydraulic projects. Monetary policy would be “prudent and neutral”, with the broad M2 money supply to grow 12%.
Zhang Yiping, Economist at China Merchants Securities, said Beijing was moving to reduce financial risks and reliance on debt-fueled growth – China’s total debt surged to 260% of its GDP last year, up from 125% in 2008, the South China Morning Post reports. Property and the stock market are two sources of risk that the government has been trying to address. Premier Li said that China must remain alert to “non-performing loans, bond defaults, shadow banking and internet finance”, vowing that China would erect a “firewall against financial risks”.
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