China drops GDP target

The Chinese government’s GDP target is suspended due to COVID-19 uncertainty but that shouldn’t worry China’s major trading partners

23 May 2020 | Marcus Reubenstein (Image: Xinhua)

For the first time ever, China will not set an annual economic growth target, Premier Li Keqiang confirmed at the National People’s Congress on Friday in Beijing.

GDP dropped by an unprecedented 6.8% in the first quarter of 2020 as China was the first nation to experience the coronavirus pandemic. A mass lockdown stopped the world’s second largest economy in its tracks, but China is now returning to pace while other nations still struggle to cope.

The move was expected and officially confirmed by Premier Li Keqiang at yesterday’s meeting of the NPC.

For those in the west who don’t follow Chinese politics closely, Xi Jinping is China’s head of state, while Le Keqiang is the head of government. In terms understood in the west Xi Jinping is President and Li Keqiang is Prime Minister – both jobs carry significant responsibilities.

Premier Li told the meeting, “We have not set the specific [gross domestic product] target mainly due to the global pandemic and big uncertainties in the economy and trade.” Also saying that China was facing an “unpredictable” time.

Despite hysteria in some narrow global quarters about China’s system of government, the plans delivered by the premier have all the hallmarks of a free market economy.

There were positive signs for nations exporting good to China, with the premier announcing plans to lower compliance costs for Chinese importers. He also confirmed the staging of the China International Import Expo will go ahead, saying the nation will, “work actively to expand imports, and foster a large globally-oriented market of higher standards.”

The other main announcements – ignored by the mainstream media – were six clear points for strengthening mechanisms for the early detection and identification of infectious diseases.

Here are the major points published in the government work report:

❶ The economy remained stable overall

►GDP reached 99.1 trillion yuan, growing by 6.1%.

►13.52 million new urban jobs were added, and the surveyed unemployment rate was below 5.3%.

►Consumer prices rose by 2.9%.

►A basic equilibrium was maintained in the balance of payments.

❷ The economic structure continued to improve, and the development priorities of regions are better aligned

►Total retail sales of consumer goods exceeded 40 trillion yuan.

►Consumption continued to serve as the main engine driving growth.

►For the first time, permanent urban residents exceeded 60 percent of the population.

❸ New growth drivers became stronger

►Business startups and innovation continued to surge nationwide, with an average net increase of over 10,000 businesses per day.

❹  Major headway was made in reform and opening-up

►We cut taxes and fees by 2.36 trillion yuan, going well beyond our target of 2 trillion yuan, with manufacturing and micro and small businesses benefiting most.

►Regulations for the implementation of the Foreign Investment Law were adopted.

►The China (Shanghai) Pilot Free Trade Zone Lin’gang New Area was established.

❺ Pivotal progress was achieved in the three critical battles against poverty, pollution, and potential risk

►Decisive achievements were made in poverty alleviation—the rural poor population was reduced by 11.09 million, and the poverty headcount ratio fell to 0.6 percent.

❻ Living standards continued to improve

►Per capita disposable personal income topped 30,000 yuan.

►The number of students in compulsory education receiving living allowances increased by almost 40 percent.

►Enrolments at vocational colleges grew by one million.

Main targets for development and the overall plan for the next stage of work

❶ Main targets

►Over 9 million new urban jobs, a surveyed urban unemployment rate of around 6%, and a registered urban unemployment rate of around 5.5%.

►CPI increase of around 3.5%.

►More stable and higher-quality imports and exports, and a basic equilibrium in the balance of payments.

►Growth in personal income that is basically in step with economic growth.

►Elimination of poverty among all rural residents living below the current poverty line and in all poor counties.

►Effective prevention and control of major financial risks.

►A further drop in energy consumption per unit of GDP and the discharge of major pollutants.

►Accomplishment of the 13th Five-Year Plan.

We have not set a specific target for economic growth this year.
This is because our country will face some factors that are difficult to predict in its development, due to the great uncertainty regarding the COVID-19 pandemic and the world economic and trade environment. 

Not setting a specific target for economic growth will enable all of us to concentrate on ensuring stability on the six fronts and security in the six areas.

❷ Pursue a more proactive and impactful fiscal policy

►Deficit-to-GDP ratio this year is projected at more than 3.6%, with a deficit increase of 1 trillion yuan over last year.

►Issue 1 trillion yuan of government bonds for COVID-19 control.

❸ Pursue a prudent monetary policy in a more flexible and appropriate way

►Use a variety of tools such as required reserve ratio reductions, interest rate cuts, and re-lending to enable M2 money supply and aggregate financing to grow at notably higher rates than last year.

❹ Strengthen the employment-first policy with comprehensive measures

►Strive to keep existing jobs secure.

►Work actively to create new ones.

►Help unemployed people find work.

Forcefully implementing macro policies to keep businesses and employment stable

❶ Further cut taxes and fees

►Aggressively implement current policies in conjunction with institutional arrangements.

►Expect additional savings of more than 2.5 trillion yuan for enterprises throughout the year.

 Reduce enterprises’ production and operating costs

❸ Increase financial support to keep business operations stable

►Ensure that micro, small, and medium businesses have significantly better access to loans and that overall financing costs drop markedly.

❹ Make every effort to stabilize and expand employment

►Increase employment support for key sectors and key groups.

►Support flexible employment.

►This year and next, provide more than 35 million vocational skills training opportunities, and grow enrollment in vocational colleges by 2 million.

Energizing market entities through reform and strengthening the new drivers of growth

❶ Press ahead with reforms to streamline administration and delegate power, improve regulation, and upgrade services

►Boost the resumption of work, production, and business activities.

►Make sustained efforts to create a market-oriented, law-based, and internationalized business environment.

❷ Advance reforms to promote market-based allocation of production factors

❸ Improve the performance of state capital and SOE reforms

❹ Foster an enabling environment for the development of the private sector

❺ Encourage the upgrading of manufacturing and the growth of emerging industries

►Boost smart manufacturing.

►Create new competitive strengths in the digital economy.

❻ Boost our capacity to support technological innovation

❼ Continue to encourage business startups and innovation nationwide

Implementing the strategy of expanding domestic demand and promoting accelerated transformation of the economic growth model

❶ Promote the recovery of consumption

►Support the recovery and development of consumer services.

 Expand effective investment

Priority will be given to new infrastructure and new urbanization initiatives and major projects, which not only boost consumption and benefit the people, but also facilitate structural adjustments and enhance the sustainability of growth. Efforts will be made mainly in the following three areas:

►Step up the construction of new types of infrastructure, developing next-generation information networks.

►Strengthen the development of a new type of urbanization, improving public facilities and services in county seats and beginning the renovation of 39,000 old urban residential communities.

►Redouble efforts to develop major transportation and water conservancy projects.

❸ Steadily advance new urbanization

❹ Step up implementation of China’s regional development strategies

► Implement a package of policies to support Hubei’s development.

❺ Ensure more effective protection of ecosystems and the environment

❻ Safeguard energy security

Achieving poverty reduction goals and working for good harvests and growth in rural income

❶ Win the fight against poverty

►Channel greater energy into eliminating poverty in all remaining poor counties and villages.

►Continue to promote both poverty alleviation and rural revitalization.

❷ Work to bolster agricultural production

►Keep total crop acreage and grain output stable.

►Penalize the acquisition of farmland for other purposes in violation of laws and regulations.

►Increase the area of high-standard cropland by 5.33 million hectares.

❸ Create more channels for rural residents to find employment and increase their incomes

►Support modern agricultural facilities, safe drinking water projects, and the improvement of living environments.

Promoting higher-standard opening-up and stabilizing the overall performance of foreign trade and foreign investment

❶ Stabilize the overall performance of foreign trade

►Help businesses get more orders and keep their employees on.

►Work actively to expand imports.

►Foster a large globally-oriented market of higher standards.

 Step up utilization of foreign capital

►Significantly shorten the negative list for foreign investment.

►Draw up a negative list for cross-border trade in services.

►Foster an enabling market environment in which all companies, Chinese and foreign, are treated as equals and engaged in fair competition.

❸ Focus on quality in the joint pursuit of the Belt and Road Initiative

❹ Promote liberalization and facilitation of trade and investment

Advancing the reform and development of social programs to safeguard and improve living standards

❶ Enhance the public health system

►Improve mechanisms for direct reporting and early warning of infectious diseases.

►Ensure prompt, open, and transparent release of epidemic information.

►Increase inputs into the R&D of vaccines, medicines, and rapid testing technologies.

►Build more medical facilities for epidemic control and treatment.

►Greatly enhance our prevention and control capability.

►Resolutely prevent a resurgence of COVID-19.

 Improve basic medical services

►Pilot inter-provincial on-the-spot settlement of outpatient bills through basic medical insurance accounts.

►Tighten up supervision over food and drugs.

❸ Develop more equitable and higher-quality education

►See that teaching in primary and secondary schools and entrance examinations for senior high school and university are well-organized.

❹ Make greater effort to meet people’s basic living needs

►Increase the basic pension for retirees and the minimum basic old-age pension for rural and non-working urban residents.

►Extend the coverage of unemployment insurance and subsistence allowances.

►Ensure assistance is provided to anyone who runs into temporary difficulty.

 Organize rich intellectual and cultural activities for our people

❻ Create new and better ways to conduct social governance

❼ Strengthen accountability for workplace safety