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…
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