Premier Li explains why China chose to maintain 7.5% growth target

Chinese Premier Li Keqiang shed light on the Chinese leadership’s thinking on why it chose to maintain a 7.5 per cent growth target this year, in spite of earlier recommendations from some influential Chinese think-tanks to lower the target to 7 per cent.

Maintaining the 7.5 per cent target this year “is beneficial to strengthening market confidence and improving the economic structure”, explained Mr Li in a work report delivered at the opening ceremony of China’s Parliament, the National People’s Congress this morning.

Growing at this stable rate would also support jobs creation, satisfying the needs of urban residents for jobs while providing opportunities for the rural residents who are moving into cities as part of the country’s urbanization push, he added.

China is targeting to create more than 10 million jobs this year – up from “over 9 million” last year. And it aims to contain urban unemployment rate at under 4.6 per cent.

Some Chinese think-tanks such as the Chinese Academy of Social Sciences had earlier raised the possibility that Beijing could lower its growth target this year to 7 per cent, amid continued weakness in the global economy as well as to send a strong signal to local officials to focus on improving the quality – rather than speed – of growth.

In order to achieve this GDP target, China will deepen its reforms, creating new growth drivers by accelerating industrialization and urbanization while supporting a more modern agricultural sector and IT industry.

A slower pace of growth could also free up more resources for China to focus on reforms that introduce more market forces into the economy, reduce waste and pollution, as well as boost domestic consumption. This could create greener and more balanced growth.

Mr Li indicated that the quality of growth will also improve even with a relatively fast pace of development at 7.5 per cent.

Beijing will “accelerate efforts to restructure and upgrade the economy”, while strengthening its basic public services in order to improve the quality of life for the people, he pledged.

With price rises being a key concern for Chinese people amid rising costs of staples like meat as well as big-ticket items like the property, Beijing’s decision to keep the inflation target stable at 3.5 per cent reflects its efforts to “protect the people’s interests” despite new price hikes this year.

But Mr Li warned that the world’s No.2 economy could face headwinds in meeting these targets.

“In 2014 we are still in a complex environment with both favourable and unfavourable factors,” Mr Li told delegates at the Great Hall of the People.

“The world economic recovery still faces instability and uncertainties." he said, adding: “We are at a critical juncture where our path upwards is particularly steep."