China eyes slower economic growth as headwinds gather

BEIJING, March 5 (Reuters) – China on Saturday was aiming for slower economic growth of around 5.5% this year as domestic headwinds including a slowdown in its vast real estate sector and sluggish consumption cloud the outlook for the second largest country in the world. economy.

Gross domestic product grew by 8.1% last year, its best performance in a decade and beating the government’s target by more than 6%, helped by robust exports to economies affected by COVID-19 and a weak statistical base in 2020, when the pandemic began to spread. worldwide.

As economic conditions began to ease, the central bank began cutting interest rates, local governments accelerated infrastructure spending, and the finance ministry promised further tax cuts.

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“A comprehensive analysis of the changing dynamics at home and abroad indicates that this year our country will encounter many more risks and challenges, and we must continue to push to overcome them,” the Prime Minister said. Minister Li Keqiang at the Great Hall of the People as he delivered the government work report for the year.

“In our work this year, we must make economic stability our top priority and pursue progress while ensuring stability.”

The budget deficit target has been set at around 2.8% of gross domestic product (GDP), down from last year’s target of around 3.2% of GDP.

“It may be a bit difficult to reach the (GDP) target, and we need to take some steps to get there,” said Zong Liang, chief researcher at the Bank of China.

The consumer price index target remained unchanged at around 3%, while the local government special bond issue quota was set at 3.65 trillion yuan ($578 billion), also unchanged.

The economy is being weighed down by a housing slowdown triggered by a government campaign to control borrowing among heavily indebted developers. The resulting tightening of liquidity weighed on the sector and dampened buyer sentiment.

Sporadic outbreaks of COVID across China and the arrival of Delta and Omicron variants have erected new hurdles to growth, as harsh anti-coronavirus measures hit the industrial and hospitality sectors.

China will accelerate research and development of COVID vaccines and drugs, according to Li’s report.

With COVID still a concern, this year’s parliamentary meeting will be the shortest ever at 6.5 days.

“It’s unclear to what extent infrastructure investment may increase in 2022 to offset these negative housing and COVID effects,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“Premier Li also acknowledged the difficulty, saying ‘it will take great efforts to achieve such goals.’ He did not make similar comments last year.”

MONOPOLIES AND POLITICS

According to Li’s report, China will continue to implement policies to ensure fair competition and take stronger action against monopolies.

The government has pledged to secure electricity supplies for residential and industrial users this year after an electricity crisis in 2021.

China will also ensure the supply of key agricultural products, including grains, and increase the production of soybeans and other oilseeds. Read more

On the political side, Li reiterated China’s commitment to the “one country, two systems” policy governing Hong Kong and Macao, affirming global jurisdiction and the principle that the two territories are ruled by “patriots”.

He also said China remains committed to the ruling Communist Party’s policy of “resolving the Taiwan issue in the new era.”

There was no mention of the war in Ukraine in Li’s speech, which as usual focused mainly on economic issues.

China’s defense spending in 2022 will rise 7.1% from 2021, according to a separate finance ministry budget report, up from the 6.8% increase forecast last year.

($1 = 6.3188 Chinese yuan renminbi)

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Reporting by Carlos Garcia, Kevin Yao, Judy Hua, Albee Zhang, Ella Cao, Liangping Gao, Shivani Singh, Hallie Gu, Muyu Xu, Min Zhang, David Stanway, Brenda Goh, Yingzhi Yang, Eduardo Baptista, Sophie Yu, Yan Zhang, Samuel Shen, Roxanne Liu, Yew Lun Tian, ​​Ben Blanchard and Ryan Woo; Editing by Sandra Maler, William Mallard and Christian Schmollinger

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