As coronavirus outbreak hammers the world’s second-biggest economy, China dropped its annual growth target for the first time on Friday and pledged more government spending, setting a sombre tone to this year’s meeting of parliament.
The omission from Premier Li Keqiang’s work report marks the first time China has not set a target for gross domestic product (GDP) since the government began publishing such goals in 1990.
Given “great uncertainty” caused by the COVID-19 pandemic, Beijing will “give priority to stabilising employment and ensuring living standards”, Li told the opening of the National People’s Congress.
The economy shrank 6.8 per cent in the first quarter, the first contraction in decades, hit by the outbreak of the new coronavirus.
“We have not set a specific target for economic growth for the year, mainly because the global epidemic situation and economic and trade situation are very uncertain, and China’s development is facing some unpredictable factors,” Li said.
He further warned that domestic consumption, investment and exports are falling, and the pressure on employment is rising significantly, while financial risks are mounting.
According to Li’s report, China has set a target to create more than 9 million urban jobs this year, down from a goal of at least 11 million in 2019 and the lowest since 2013.
Li said China was “keenly aware of the difficulties and problems” the country faced, with COVID-19 sending the world economy into recession.
“At present, the epidemic has not yet come to an end, while the tasks we face in promoting development are immense,” he continued, adding that China’s government must “redouble our efforts to minimise the losses resulting from the virus”.
China is targeting a 2020 budget deficit of at least 3.6 per cent of GDP, above last year’s 2.8 per cent, and fixed the quota on local-government special bond issuance at 3.75 trillion yuan (US$527 billion), up from 2.15 trillion yuan, according to Li.
“The government will issue 1 trillion yuan in special treasury bonds this year, the first such issuance. It will transfer 2 trillion yuan raised from the bigger 2020 budget deficit and special anti-coronavirus treasury bonds to local governments”, Li said.
Li said governments at all levels should “tighten their belts”, and that all types of surplus, idle and carryover funds will be withdrawn and re-allocated, to be put to better use.
In line with the slower economy, monetary policy will be made more flexible, Li said, adding that growth in M2 – a broad gauge of money supply – and total social financing will be significantly higher this year.
“The People’s Bank of China (PBOC) will guide its benchmark lending rate lower”, he said.
While briefing the Parliament, Li also announced that small and midsize companies can delay paying loans and interest by a further nine months, through March 2021, and lending to SMEs by big commercial banks should grow more than 40 per cent.
“The tax and fee burden shouldered by companies will be cut by 2.5 trillion yuan this year”, he added.