Chinese Premier Li Keqiang said there’s some flexibility around the nation’s target of 7.5 percent growth this year without specifying how much of a slowdown leaders would tolerate.
“Since we say the GDP growth target is about 7.5 percent, ‘about’ means it has a certain degree of flexibility,” Li said at a press briefing in Beijing today, adding that the government’s key concerns are jobs and livelihoods. “A bit higher or a bit lower, we have a level of tolerance here.”
Li is trying to rein in debt and pollution while avoiding a sharper economic slowdown, after exports fell by the most since 2009 in February and factory-gate deflation deepened. Figures due later today may show industrial-production growth slowed in the first two months of 2014 from December’s pace, based on a survey of analysts.
The government last week retained a goal for 7.5 percent growth in 2014 to sustain employment and boost confidence, after the economy expanded 7.7 percent in 2013. Inflation (CNCPIYOY) and money-supply targets were unchanged and the budget deficit as a percentage of gross domestic product will be about the same as last year.
“We set the growth target at about 7.5 percent because we are thinking about ensuring employment, benefiting people and boosting the incomes of urban and rural residents,” Li said after the end of the annual meeting of the National People’s Congress, China’s legislature.
Finance Minister Lou Jiwei said last week that growth as low as 7.2 percent would meet this year’s target of “about” 7.5 percent and that the key is employment, not the exact level of growth. This year’s goal is “flexible and guiding,” the National Development and Reform Commission and Finance Ministry said in their work reports.
Li also said in the briefing that China must ensure that financial risks don’t threaten the entire system even as some defaults are unavoidable. China pays great attention to financial risk and is monitoring dangers from shadow banking, while the ratio of government debt to the size of the economy is below an internationally-recognized danger level, Li said without specifying the level.
Leaders are trying to rein in a surge in debt that’s evoked comparisons to the run-ups to Japan’s lost decade and the Asian financial crisis. The nation’s first onshore bond default and the bailout of a high-yield trust product this year have highlighted financial risks that pose a threat to the government’s expansion goal of 7.5 percent.
“Some individual cases may be unavoidable,” Li said, referring to defaults of financial products. “We must enhance monitoring and ensure timely handling to make sure that there are no systemic or regional financial risks,” he said.
The combined debt of Chinese households, corporates, financial institutions and the government rose to 226 percent of GDP last year, up from 160 percent in 2007, Credit Agricole SA estimated in a report last month. GDP reached $9.4 trillion in 2013.
To contact the editors responsible for this story: Paul Panckhurst at email@example.com Scott Lanman