China is tamping down its expectations for the economy with a growth target of “around 7 per cent” for this year.
Premier Li Keqiang said the government expects the economy to slow further after the slowest expansion in 24 years in 2014, the Financial Times reported Thursday.
It’s the new normal for the country, Li said.
Li set a 3 per cent target for consumer price inflation, a far cry from January’s annual pace of only 0.8 per cent.
It was the second time Li had used “around” in his economic growth forecast before the National People’s Congress, signaling greater flexibility in meeting the target, the report said.
China’s economy grew at 7.4 per cent last year after Li set a target of “around 7.5 per cent”, the first time since 1998 that growth has fallen short of the government’s goal.
China’s gross domestic product grew 7.7 per cent each year in 2012 and 2013.
Until 2010, the economy had maintained an average growth rate of more than 10 per cent for more than 30 years.
“China’s economic development has entered a new normal,” Li said.
“Our country is in a crucial period during which challenges need to be overcome and problems need to be resolved.”
“The target growth rate of approximately 7 per cent takes into consideration what is needed and what is possible.”
The People’s Bank of China cut interest rates in November and again last week in an effort to curb the growth slowdown and prevent a rise in real interest rates amid the slowdown in inflation.
At the same time, authorities have repeatedly stressed that a slowdown in growth is inevitable and that they do not intend to resort to heavy-handed stimulus to maintain the double-digit growth that prevailed for much of the past decade.
Li said the government wants to “achieve a basic balance of payments”, hinting at tolerance for moderate capital outflows that have put pressure on China’s currency in recent months.
China ran a balance of payments surplus of US$118 billion in 2014 but a deficit of US$66 million in the fourth quarter, only its second quarterly deficit since 1998.
Li’s work report also set a target of 10 million new urban jobs and trade growth of “around 6 per cent”.
China added 13.2 million urban jobs in 2014, according to official data.
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