China Echoes Steady Growth Mantra
China will stick to 2017’s growth target of around 6.5% in 2018, a signal that as President XI assumes the mantle of President for life, he wants no big disruptions in growth or economic activity.
At the same time the government is continuing with capacity cuts (and no doubt later this year in early Winter production curbs) in steel and coal mining.
Excess capacity in steel and coal will be cut by 30 million and 150 million tonnes respectively this year, according to a statement from the National Development and Reform Commission said Monday.
China claimed to have cut more than 50 million tonnes of steel capacity and 250 million tonnes of coal capacity last year.
The government had planned to reduce steel and coal capacity by about 50 million tonnes and over 150 million tonnes respectively in 2017.
The cuts had no impact on economic growth in 2017.
The economic planning agency also said on Monday it expects retail sales to increase by around 10% in 2018, the same as last year.
China's retail sales rose 10.2% in 2017 from a year earlier.
Some western analysts claimed the unchanged growth target was a “signalling a slowdown” from 2017’s GDP growth rate of 6.9%.
But a year ago many of the same commentators claimed that the new rate of “around 6.5% would see a slowing in activity, because it was down from the 6.7% growth rate seen in 2016.
That was a big miss as China said growth rose 6.9%. This year, no one knows what the outcome will be.
The finance ministry also announced a fiscal deficit target of 2.6% of gross domestic product on Monday, down from last year’s figure of 3%. That indicates a desire to cut government spending this year.
China also set its consumer price index at “around 3%” unchanged from a year ago and 1.8% year on year on December 2017.
Premier Li Keqiang revealed the targets as he delivered a work report to the opening of an annual meeting of the National People’s Congress (the country's rubber-stamp parliament) in Beijing on Monday.
The Congress continues until March 20 and will also see a number of new senior technocrats and others appointed to fill some key roles, such as head of the country’s central bank.
The meeting is also expected to approve a constitutional amendment to eliminate the presidential two term limit, allowing Xi Jinping to serve beyond the 10-year maximum.
The meeting will adopt the policy agenda for China’s government this year following a Communist party meeting last October, where President Xi Jinping declared a “new era” in which quality-of-life issues would take precedence over meeting numerical targets.
Some economists have forecast a slowing in the rate of GDP growth following 2017’s unexpectedly strong performance thanks to property and infrastructure spending, as well as a strong contribution from the trade surplus.
All three factors are expected to moderate this year, as a crackdown on debt (especially at the local and provincial government levels) and financial risk leads to tighter borrowing conditions for homebuyers, developers and local governments.
Premier Li also said China will keep its prudent monetary policy neutral, reaffirming authorities’ position. China will keep monetary policy neither too loose nor too tight, and will maintain reasonably steady liquidity, he said. that is a repeat of last year’s policy statement.
Li also said China will improve supervision over shadow banking, internet finance and financial holding companies, and step up risk controls at financial institutions. That tells us last year’s concentration on risk (and corrupt behaviour) among some private company heads, such as at Anbang and similar groups), will be continued.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.