20 September 2018

Li has more leeway to juggle job and growth targets

As per convention, Premier Li Keqiang {李克強} has delivered an economic report card to the All China Federation of Trade Unions, an affiliated organization of the ruling party. In an address to the workers’ group last month, the premier, apart from the usual talking points, gave a full and rare explanation of the rationale behind setting the GDP growth floor at 7.5 percent and the CPI ceiling at 3.5 percent.

Li for the first time revealed that China’s deficit-to-GDP ratio has already reached 2.1 percent, approaching the 3 percent warning line, Workers’ Daily reported. Beijing thus has little room to fuel growth simply by boosting government spending, as has been done before. Instead, there is pressing need for the nation to keep its money supply in check since more liquidity can easily bring greater inflationary pressure.

Li’s work target raises concern that a slower economy will push up the unemployment rate. Over the last three decades, China recorded average economic growth of 9.8 percent a year. This nearly double-digit clip was no accident. It was in line with the entry of 10 million people into the country’s workforce every year. A widely-acknowledged thinking in the past was that every one percentage point of GDP increment could create roughly 1 million jobs. Economic growth targets were then based on new jobs needed to absorb the expanding workforce and keep the jobless rate steady.

But Li has now assuaged market worries by saying that the unemployment concern is somewhat misplaced since the social and economic structures of China have changed substantially, compared to previous decades. The rise of service industry implies that one percentage point increase in GDP now can bring in up to 1.5 million new vacancies, he noted. As the value-added service sector continues to expand, the premier does, indeed, have more leeway to lower his GDP growth target.

– Contact the writer at [email protected]



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