China’s economy is in trouble, growth is uncertain even as the Communist Party claims victory over COVID-19. The party has recognised that by dropping its GDP target for the first time ever.
China’s National People’s Congress has decided not to set a gross domestic product target for the first time as the country faces its most severe economic downturn since the 1970s in the wake of the coronavirus outbreak.
The growth target is normally included in the work report that is presented at the annual congress, which was delayed by almost three months this year owing to the outbreak.
The Hong Kong stock market was off more than 3.5% after the Chinese government had said it plans a new security law for Hong Kong that would crackdown on democracy demonstrations.
The Shanghai market was down a more sedate 0.9%.
For all the bluster and thuggery again Australia and other critics of China’s handling of the COVID-19 crisis, the decision to drop a growth target (it was there for the Congress in the lead up to the Congress when it was due to meet in March before being postponed to this week because of the pandemic) is recognition that the administration led by President Xi has no idea about the immediate performance of the economy.
The estimate for GDP in the draft work report for the March congress had growth ‘around 6%’, implying a small dip from 2019’s 6.1%. That was before the first half slump saw GDP contract at an annual rate of 6.8%, ending China’s long run of growth.
Premier Li Keqiang’s work report on Friday, launched the country’s annual parliament meeting which has been halved in length to 7 days from the normal 14 days that was planned for March.
The working paper revealed that China is targeting a 2020 budget deficit of at least 3.6% of GDP, above last year’s 2.8%, and fixed the quota on local-government special bond issuance at 3.75 trillion yuan ($US527 billion), up more than 60% from 2.15 trillion yuan, according to Li’s report.
China will also issue 1 trillion yuan in special treasury bonds for the first time this year.
The People’s Bank of China has lowered reserve requirement ratios (RRR) 10 times since early 2018, including three cuts this year.
The central bank has cut its benchmark lending rate – the Loan Prime Rate (LPR), by 46 basis points since August 2019, when it replaced the previous benchmark lending rate with the LPR. The one-year LPR rate is currently at 3.85%. The PBOC declined to cut the rate this week.
