CHINA AIMS FOR LOWER GROWTH OF 6.5pc
Beijing targets 6.5pc expansion this year and plans ‘firewall’ against financial risks
CHINA has cut its growth target this year as the world’s second-largest economy pushes through painful reforms to address a rapid build-up in debt, and constructs a “firewall” against financial risks.
China aimed to expand its economy by around 6.5 per cent this year, said Premier Li Keqiang at the opening of the annual meeting of Parliament yesterday. China targeted growth of 6.5 to seven per cent last year and ultimately achieved 6.7 per cent, the slowest pace in 26 years.
A lending binge and increased government spending have fuelled worries among China’s top leaders about elevated debt levels and an overheating housing market.
This year’s target for broad money supply growth was cut to around 12 per cent from about 13 per cent for last year, while the government’s budget deficit target was kept unchanged at three per cent of gross domestic product (GDP).
China would continue to implement a proactive fiscal policy and maintain a prudent monetary policy, said Li, adding that government would press on with supply-side reforms and take steps to control risks and ensure safety in the financial sector.
“In general, China’s policy stance has turned to ‘risk control’ and ‘bubble deflating’. This means that the monetary policy will gradually tighten,” said Zhou Hao, emerging markets economist at Commerzbank AG in Singapore.
The target for consumer price inflation this year was kept unchanged at three per cent.
“At present, overall, systemic risks are under control. But we must be fully alert to the build-up of risks,” said Li.
China should have higher levels of vigilance concerning risks from non-performing assets, debt defaults, shadow banking and Internet finance, he said.
“We will ensure order in the financial sector and build a firewall against financial risks,” said Li.
It would steadily push forward with de-leveraging, mainly in the non-financial corporate sector, Li added.
The finance ministry pledged in its work report released yesterday to clamp down on local government debt risk.
China’s debt-to-GDP ratio rose to 277 per cent at the end of last year from 254 per cent the previous year, with an increasing share of new credit being used to pay debt servicing costs, according to a recent UBS note.
Chinese banks doled out a record 12.65 trillion yuan (RM8.17 trillion) of loans last year, and recent data shows that new yuan loans hit 2.03 trillion yuan in January, the second-highest ever.
Chinese President Xi Jinping and Premier Li Keqiang (right) at the opening of the fifth Session of the 12th National People’s Congress (NPC) at the Great Hall of the People in Beijing yesterday.