Bermuda Post

Thursday, Mar 28, 2024

China sets growth target of more than 6% in 2021

China sets growth target of more than 6% in 2021

China bucked the global recession in 2020, and in doing so narrowed the economic gap with the United States. Now it says it needs to pick up the pace this year.

Premier Li Keqiang on Friday announced that China would target growth of more than 6% in 2021.

While China emerged from the global downturn caused by the coronavirus pandemic on surer footing than any other major economy, it still only grew 2.3% in 2020.

The new target is more than what China needs to accomplish to get back on track with President Xi Jinping's long-term goal for the economy. To reach Xi's plans to double GDP by 2035, China would need to grow a bit less than 5% this year, with similar growth through the next decade or so.

But it's also still lower than what some observers would have liked to have seen for the world's second largest economy.

"China unexpectedly set a GDP growth target, but at a relatively low level," wrote Iris Pang, chief economist for Greater China at ING. "I am worried that the low GDP target could signal a possibility that the government includes a scenario for the comeback of Covid."

Li's remarks came during China's "Two Sessions" meeting, the country's biggest political gathering of the year. Beforehand, there had been an intense debate in the country about whether to bring back a GDP target, which it abandoned last year for the first time in decades as the coronavirus took hold.

"In setting this target, we have taken into account the recovery of economic activity," Li said on Friday, adding that the goal would "help sustain healthy economic growth."

Some experts — including Yang Weimin, the former secretary-general of the National Development and Reform Commission — have encouraged such guidance, saying that China needs to set benchmarks to keep its growth on pace.

But others have been wary about bringing back GDP targets just yet. Ma Jun, a policymaker at the People's Bank of China, said earlier this year that goals that are too ambitious could encourage local governments to borrow too much, heightening the risk of accumulating "hidden" debt.

A balanced recovery


China spent hundreds of billions of dollars last year on programs to stimulate economic activity, including major infrastructure projects and cash handouts for its citizens.

That amount of spending isn't carrying over to 2021.

Li said Friday that China has set the budget deficit for the year at about 3.2%, slightly lower than that of last year, "in view of the effective containment of Covid-19 and gradual economic recovery."

Li also lowered the amount of money local governments will be able to issue in special bonds this year by about 100 billion yuan ($15 billion) — though it still clocks in at some 3.65 trillion yuan ($564 billion). That money is primarily used to fund infrastructure projects, such as 5G networks, airports, railways, and charging stations.

He also said that the country would no longer issue special treasury bonds this year. The government issued about $155 billion worth of such bonds in 2020 to fund medical equipment and technology used to fight the virus.

Like other countries, China has to figure out how to balance a need for at least some additional stimulus as the recovery continues with a growing debt burden.

After all, the rate of growth last year was still China's slowest in decades. And there are some points of weakness in the economy: Retail sales have lagged, for example, suggesting that people are still wary of spending money as the country struggles to stamp out Covid-19 outbreaks entirely.

An ambitious vaccine program is part of the equation, as China tries to inoculate the 1.4 billion people who live there. So far, it's only vaccinated about 3.5% of the population, though plans to reach 40% by the end of June.

Li reiterated that the government will maintain "necessary support" for the economy and "avoid sharp turns" in policy as it tries to balance the recovery.
Analysts at Nomura said Friday that the new economic growth target could be interpreted as "too conservative."

"In our view, Beijing is acutely aware that GDP growth could exceed 8% this year," they wrote in a research note, adding that the government "may be reluctant" to set a bar that high "because of the disparate impacts among provinces and cities from the Covid-19 pandemic."

Other challenges


There are other areas for Beijing to keep an eye on this year, too.

Earlier this week, Guo Shuqing, the Communist Party boss at the central bank, told reporters that the country's property sector might be in a bubble and added that the speculative trend is "dangerous." Regulators have already issued rules meant to limit lending to the sector, and Guo's comments imply there could be a further tightening of credit.

Guo also warned that bad loans could continue to pose risks to the financial system, which could slow the pace of recovery.

A slew of major state-owned firms have declared bankruptcy or defaulted on loans in the past year — a concerning trend for a sector that Xi has wanted to bolster as a major driver of economic activity and innovation. Defaults by state firms surged to $15.5 billion in 2020, up 220% from the previous year, according to recent estimates by Jinan-based Zhongtai Securities.

China has other challenges, too.

On Friday, Li stressed the importance of job stability, adding that the country will "increase employment opportunities" where it is able. Unemployment remains a big concern for Beijing, and the country has pledged to create at least 11 million new jobs in urban areas this year.

While the country's urban unemployment rate remains about 5.6%, some analysts suspect the full picture could be much higher.

"The risk to the Chinese economy [in 2021] is a consumption slowdown," said Yao Yang, director of the China Center for Economic Research at China's Peking University, in a video published on a Tencent-affiliated media website in December. He said that China's overall unemployment rate could be near 20%, much higher than the government's count of urban unemployment.

The country is also trying to boost its economy as it works toward other priorities, including a desire to shed its reliance on the United States for key technology — though some of its efforts have been hampered by US restrictions on Chinese companies, such as Semiconductor Manufacturing International Corporation.

On Friday, Li said the government will focus on innovation by spending more money on research and development.
The country is trying to reduce emissions, and intends to "strengthen comprehensive measures and joint efforts on air pollution prevention and control," according to Li.

Becoming carbon neutral by 2060 is one of China's big priorities — a lofty goal, considering China uses more coal than the rest of the world combined.

Newsletter

Related Articles

Bermuda Post
0:00
0:00
Close
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
Steve Jobs' Son Launches Venture Capital Firm With $200 Million For Cancer Treatments
Israel: Unprecedented Civil Disobedience Looms as IDF Reservists Protest Judiciary Reform
Google reshuffles Assistant unit, lays off some staffers, to 'supercharge' products with A.I.
End of Viagra? FDA approved a gel against erectile dysfunction
UK sanctions Russians judges over dual British national Kara-Murza's trial
US restricts visa-free travel for Hungarian passport holders because of security concerns
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Political leader from South Africa, Julius Malema, led violent racist chants at a massive rally on Saturday
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Spanish Citizenship Granted to Iranian chess player who removed hijab
US Senate Republican Mitch McConnell freezes up, leaves press conference
Speaker McCarthy says the United States House of Representatives is getting ready to impeach Joe Biden.
San Francisco car crash
This camera man is a genius
3D ad in front of Burj Khalifa
Next level gaming
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
'I just lost it' Lowe’s worker fired after 13 years of employment for confronting thieves trying to steal $2K of merchandise
The politician and the journalist lost control and started fighting on live broadcast.
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
Joe Biden admitted, in his own words, that he delivered what he promised in exchange for the $10 million bribe he received from the Ukraine Oil Company.
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
Europe is boiling: Extreme Weather Conditions Prevail Across the Continent
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Italian Court's Controversial Ruling on Sexual Harassment Ignites Uproar
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
×