China targets 7.5% economic growth for 2014

Wednesday 05 March 2014 18.11
China's 30 years of rapid industrialisation have transformed its economy and seen incomes soar
China's 30 years of rapid industrialisation have transformed its economy and seen incomes soar

China is targeting growth of about 7.5% in 2014, Premier Li Keqiang has said, unchanged from last year as the government tempers expectations for an economy transitioning to a more sustainable model.

The announcement came in Li's speech to the annual session of the National People's Congress, which meets to approve policies decided by the ruling Communist party.

"We must keep economic development as the central task and maintain a proper growth rate," Li said.

"On the basis of careful comparison and repeatedly weighing various factors, as well as considering what is needed and what is possible, we set a growth target of around 7.5%," he added.

China's three decades of rapid industrialisation have transformed its economy and seen incomes soar, but have also brought severe environmental consequences including smog that regularly blankets cities.

In his speech Li said he is "declaring war" on pollution, describing it as a "red-light warning" against inefficiency as he sought to address public concerns on issues from poisoned waterways to food safety.

"We will declare war against pollution and fight it with the same determination we battled poverty," he said.

The world's second-largest economy grew 7.7% in 2013, the same as in 2012 - which was the slowest rate of growth since 1999.

Rising prosperity is a key part of the Communist Party's claim to legitimacy in China, and the government usually sets a conservative economic growth target that it regularly exceeds.

The figure is closely watched by analysts for insight into the leadership's thinking about the economy and how they expect it to perform, as well as what policy initiatives they intend to pursue.

Keeping the target unchanged from last year suggests the government wants to stress stability as it carries out promised economic reforms, analysts said.

The 7.5% GDP goal came after soft recent economic data, with a key manufacturing index slipping to an eight-month low in February, the government said last week.

China's leadership has said it wants to transform the country's economic growth model away from an over-reliance on often wasteful investment, and instead make private demand the driver for the country's future development.

They expect the change to result in slower but more sustainable rates of expansion.

"This target... will boost market confidence and promote economic structural adjustment," Li said in the speech, his first work report since becoming premier at last year's NPC. 

"Boosting domestic demand is both a major force driving economic growth and an important structural adjustment," he added.

China's once regular annual double-digit growth rates have been on a slowing trend, and the 2013 result meant GDP growth had been in single figures for three consecutive years for the first time since 2002.

The NPC comes after a major Communist Party meeting known as the Third Plenum in November that flagged economic reforms including allowing the market to play a "decisive" role in the economy.

"Reform has brought us the greatest benefits," Li said, adding there would be more changes to the financial sector, such as allowing financial institutions greater authority to set interest rates.

China began allowing banks to decide their own lending rates in July last year, but still sets deposit rates by administrative order.

Li vowed to keep China's yuan currency "basically stable at an appropriate, balanced level", while expanding the band within which it is allowed to float against other units and moving towards capital account convertibility.