China on Saturday set a lower growth target of at least 6.5% for the next five years, with Premier Li Keqiang warning of a tough battle ahead as the world’s second largest economy goes through structural changes and an inevitable slowdown.
Pushed down by falling demand for its goods globally and overcapacity in its manufacturing sector, China’s growth at 6.9% in 2015 was its slowest in the past 25 years.
As he opened the National People’s Congress (NPC) or the annual parliament, Li said the aim is to keep China growing at between 6.5% and 7% in the next five years and double its 2010 GDP and per capita personal income. The annual meeting sets the country’s political and economic agenda.
“The larger the economy grows, the greater the difficulty of achieving growth,” Li said. “Our country’s development faces more and greater difficulties...so we must be prepared for a tough battle.”
But the government’s work report released at the inaugural session of the country’s top legislature did not fail to mention that China’s growth rate was “faster than that of most other major economies”.
Despite slower growth, Li said, China still created 13.12 million new jobs and increased per capita disposable income by 7.4%.
At the session in the Great Hall of the People, Li also unveiled the draft of the 13th five year plan for economic and social development during 2016-20. The gross domestic product will exceed 92.7 trillion yuan ($14.2 trillion) in 2020, compared with 67.7 trillion yuan ($10.4 trillion) in 2015, the draft said.
To boost growth, China will implement an “innovation-driven development strategy and promote science and technology innovation, mass innovation and entrepreneurship, with supporting reforms and policies”, the work report said.
Li listed a package of pragmatic policies to address economic weakness, including tax cuts, a flexible monetary policy, cut of overcapacity, and business creativity.
He assured the Communist Party of China’s top leadership, including President Xi Jinping and the 3000-odd NPC deputies, that the “capacity glut in steel, coal and other heavy industries” would be addressed.
“We will focus on addressing the overcapacity in the steel, coal and other industries facing difficulty…We will use economic, legal, technological, environmental, quality inspection and safety-related means to strictly control the expansion of production capacity…and eliminate overcapacity…We will address the issue of ‘zombie enterprises’ proactively yet prudently by mergers, reorganisations,” he said.
Li said 100 billion Yuan will be “mainly used to resettle employees laid-off from these enterprises”.
China, according to Reuters, aims to lay off five to six million state workers over the next two to three years.
The government, Li indicated, was aware about the social unrest that tough economic decisions could trigger.
Warning of “more and tougher problems and challenges” this year, Li said China must be fully prepared to fight a difficult battle.
The parliament is perceived as a rubber stamp affair though the prime minister’s speech provides insight into overall policy.