Li confident of realizing growth target
China is set to achieve its annual economic growth target while pushing forward supply- side reform, Premier Li Keqiang said on Wednesday.
The country has policy tools in place to anchor the economy if “it slides below the appropriate range”, he told a news conference.
Li said there is still ample room for investment to boost the economy — in the underdeveloped central and western regions, for example.
New growth engines will be cultivated to make up for the weakening role of traditional sectors in contributing to economic growth, he said.
“We will develop ‘the new economy’ — that is, we will foster new growth engines to help promote economic restructuring.”
These new engines include not only emerging industries such as the Internet, the Internet of Things, cloud computing and e-commerce, but also state-of-the-art manufacturing, such as intelligent manufacturing and customized production, the premier said.
Traditional growth engines tend to weaken as an economy matures, which has happened in many countries, especially developed ones. This calls for new emerging industries, together with traditional sectors, to promote economic growth, he said.
China has seen an economic slowdown in the first two months of the year as growth in both industrial production and retail sales dipped.
Uncertainties in global markets, such as weak demand and financial market volatility caused by interest rate decisions taken by the US Federal Reserve this year, have also added pressure on China.
“The Chinese economy still has a lot of potential (for growth),” Li said. “There will be no hard-landing as long as the reforms continue.”
China has decided to launch supply-side reform — an initiative to lower barriers to production through such measures as tax cuts and shedding overcapacity — to stimulate economic vitality.
The country will not falter in carrying out its reform agenda while ensuring that growth is not seriously affected, Li said. “One thing is for sure — we are determined to push ahead with our reform agenda.”
He said the authorities will also step up financial supervision through better coordination between departments to ward off risks presented by the many innovative financial products on the market and the interconnection of different financial sectors.
“We need to reform and improve our financial regulatory system, and we will strengthen coordination (among different regulatory bodies),” he said.
China has reduced interest rates and banks’ reserve requirement ratio to increase liquidity and lower the costs of production to boost the economy after GDP grew by 6.9 percent last year, the slowest pace since 1990.
Li said these decisions were taken to lower the financing costs of enterprises, and were not monetary easing.
Liang Haiming, a senior economist at Pangoal, a think tank in Beijing, said: “China’s monetary policy is generally adjusted flexibly in line with the development of the economy.
“Such flexibility can ensure ample capital for supporting the economy, increasing jobs and promoting people’s well-being.
“Its monetary stance will not be ultra-loose.”
China has set a GDP growth target of 6.5 to 7 percent for this year.
It plans to raise the deficit to GDP ratio to 3 percent this year, compared with 2.4 percent last year.
Wang Tao, chief China economist at UBS, said in a research report that the country is expected to increase investment in infrastructure, services and strategic new industries while pushing structural reforms, such as lowering restrictions on market entrance, to support stable growth this year.
Thanks to China’s improving economic activity, investment and industrial production may rebound in the short term, she said.