China sets GDP growth target of over 6 per cent this year

Economists expect China's economy to grow between 7 per cent and 9 per cent this year.
Economists expect China's economy to grow between 7 per cent and 9 per cent this year.PHOTO: EPA-EFE

BEIJING - China has set an annual gross domestic product (GDP) target of over 6 per cent for this year despite continuing global uncertainties caused by the Covid-19 outbreak, defying economists’ prediction that there would be none.

In presenting his yearly work report on Friday (March 5) at the opening of the country’s top annual legislative meeting, Premier Li Keqiang said the target takes into account the country’s economic recovery.

China’s GDP grew by 2.3 per cent last year despite the devastating effects of the pandemic, making it the only major economy in the world to post an expansion.

"A target of over 6 per cent will enable all of us to devote full energy to promoting reform, innovation and high-quality development," said the premier.

Last year, China did not set a GDP target for the first time since 1990 after the coronavirus outbreak upended the economy.

In 2019, the government set one for between 6 and 6.5 per cent, and came within range at 6.1 per cent.

The modest target for this year pales in comparison to projections that China’s economy will grow between 7 and 9 per cent.

"China’s economic growth can easily surpass 6 per cent in 2021, from the low base of 2020. A flexible target aims to give greater room for policy making," said Dr Yue Su, principal economist at The Economist Intelligence Unit.

But taken with a budget deficit goal of 3.2 per cent of GDP this year suggesting continued government spending to aid recovery, ING chief economist Iris Pang said she is "worried that the low GDP target could signal a possibility that the government includes a scenario for the comeback of Covid".

"If I worry too much and Covid in fact does not make a comeback in China then most of the fiscal money will be used to advance technology," she added.

The world’s No. 2 economy is embarking on an aggressive drive to develop technological self-reliance especially in semiconductor chips, artificial intelligence and next-generation telecommunications, and boost domestic consumption.

The Biden administration has indicated that it intends to work with allies to restrict certain technology from being sold to China.

On Friday, Mr Li said China will quicken the pace to build its strategic scientific and technological capability and make "major breakthroughs in core technologies", with an increased R&D spending of more than 7 per cent over the next five years. Government expenditure on basic research will increase by 10.6 per cent, he said.

Other targets for this year include creating over 11 million new urban jobs, and a surveyed urban unemployment rate of around 5.5 per cent. Last year, it targeted 9 million new urban jobs but added 11.86 million jobs, while urban unemployment was 5.2 per cent, said Mr Li.

The target for consumer price inflation for the year is around 3 per cent, compared to 3.5 per cent last year, although actual growth hit just 2.5 per cent.

Lawmakers will also endorse the 14th Five-Year Plan and Long-Range Objectives through the Year 2035 that chart a course for the country’s economic trajectory and environmental targets until 2025 and 2035.

China is forecast to surpass the US to become the world's largest economy by 2028, five years earlier than previous projections as the two economies diverge over their post-Covid-19 recovery.