China targets 6.5% growth

China aims to expand its economy by around 6.5 per cent this year, the same as in 2017, while pressing ahead with its campaign to reduce risks in the financial system, Premier Li Keqiang said Monday. The goal was kept unchanged even though the economy grew 6.9 per cent last year and exceeded the government’s target.

Economists had already expected the world’s secondlargest economy to lose some momentum this year as the government deepens its push to contain a build-up in corporate debt, while a war on pollution and a cooling property market weigh on its manufacturers.

Reinforcing views that Beijing’s attention remains firmly fixed on credit risks and better quality growth, when Li unveiled the GDP target he omitted previous wording saying growth could be“higher if possible.”

In his annual work report, Li also said China has cut its budget deficit target for the first time since 2012, suggesting Beijing will be more watchful of fiscal spending while not tapping the brakes so hard that it risks a sharper slowdown. “Policy wise, the report definitely has a tightening bias,” said Betty Wang, senior China economist at ANZ in Hong Kong.“In line with expectations, the government is pushing through their reform agenda.”

But last week’s escalation in trade tensions with the United States has jumped to the top of the list of uncertainties facing China this year. President Donald Trump said he would impose hefty tariffs on imported steel and aluminum to protect US producers, risking retaliation from major trade partners like China and sparking fears of a global trade war.

Li said China opposes protectionism and supports the settlement of trade disputes through negotiation, but will“resolutely safeguard” its legitimate rights and interest.

Deficit target trimmed

Li said China has cut its budget deficit target to 2.6 percent of GDP from 3 percent in 2017. Most analysts had expected it to be maintained or trimmed only slightly.

However, since the economy has been expanding at such a strong pace, analysts said the cut was again more symbolic of Beijing’s intention to further control debt growth.

“The actual figure is even lower than we expected...a 2.6 percent deficit would be about 2.3 trillion yuan ($363.5 billion) in absolute terms, which equals to the 2016 level,” said ANZ’s Wang. “It shows the government’s determination to control leverage in the economy.”