Chinese Premier Li Keqiang pledged to open the economy to more market forces and strip power from the government to achieve 7.5 percent annual growth through 2020 and spread the benefits of the nation’s expansion.
“It’s about cutting power, it’s a self-imposed revolution,” Li, 57, said at a briefing yesterday at Beijing’s Great Hall of the People, his first after being named premier on March 15. “It will be very painful and even feel like cutting one’s wrist.”
Li’s economic team retained People’s Bank of China Governor Zhou Xiaochuan and added sovereign wealth fund chief Lou Jiwei as finance minister after a once-in-a-decade leadership transition. The premier vowed stronger support for migrant workers in cities as the Communist Party pushes urbanization to fuel growth constrained by a shrinking labor force and limits on a property market where new home prices posted the broadest advance since December 2011.
“The leadership knows what needs to be done, the key is action,” Ha Jiming, vice chairman and chief investment strategist for Goldman Sachs Group Inc.’s investment management division for China, said from Hong Kong. “People in the market, after hearing all these encouraging remarks, are waiting to see concrete measures.”
Li talked of a “hand” mistakenly attached to the state that needed to be returned to the market. He added that 7.5 percent growth is needed to meet targets for 2020, which include doubling per capita income. Gross domestic product last year expanded 7.8 percent, the least in 13 years.
The Shanghai Composite Index is down about 7 percent from this year’s Feb. 6 peak on concerns that an economic recovery will falter as officials cool the property market and counter risks for banks from an expansion in credit. The gauge fell 0.7 percent as of 11:01 a.m. local time today.
Li pledged to trim government bureaucracy, cut regulations and fight graft while reducing environmental harm and pollution, calling for “equal opportunities for everyone.”
“We shouldn’t pursue economic growth at the expense of the environment -- such growth won’t satisfy the people,” he said.
State media transcripts that said he discussed 7 percent growth were at odds with his spoken remarks. The government’s five-year plan through 2015 calls for a 7 percent pace.
“We need to maintain steady economic growth, prevent inflation and control latent risks,” Li said. “That will not be easy, but we have favorable conditions in place and enormous potential in domestic demand.”
In the first two months of this year, the economy moved back toward the old pattern of relying on exports, which rose the most since 2010, and fixed-asset investment, rather than consumer spending, intended to be the new engine of growth.
New home prices climbed in 62 cities of the 70 the government tracks in February from a year earlier, the National Bureau of Statistics said today. China on March 1 imposed its toughest property curbs in a year, including ordering the central bank to raise some down-payment requirements and mortgage rates and enforcing a property sales tax.
Elsewhere in Asia, Singapore’s exports fell almost twice as much as economists estimated in February from a year ago as shipments to Europe and the U.S. plunged. Data to be published in Europe may show the euro area’s trade surplus narrowed in January from the previous month, while a report in the U.S. from the National Association of Home Builders and Wells Fargo is projected to show an increase in confidence in March.
The two-week parliamentary session that ended yesterday concluded a four-month transition process that saw Xi Jinping assume the top party, military and government titles.
Zhou, 65, and Lou, 62, will be joined by new Commerce Minister Gao Hucheng, 61, and Xu Shaoshi, 61, the new head of the National Development and Reform Commission, the economic planning agency. Lou may be the new appointee with the highest international profile, after overseeing purchases including a stake in Morgan Stanley as founding chairman of sovereign wealth fund China Investment Corp.
“He brings a practical, rather than an ideological, approach to financial diplomacy,” said David Loevinger, former senior coordinator for China affairs at the U.S. Treasury Department, who’s now an analyst in Los Angeles at TCW Group Inc., which oversees about $138 billion.
Zhang Gaoli, appointed as the most senior vice premier, will be among officials serving as a counter-balance to those pushing for change such as Zhou and Lou, said Yukon Huang, a former China country director for the World Bank. Zhang oversaw a surge in infrastructure spending in Tianjin, a municipality near Beijing, that left the city’s state-owned public works companies among the most indebted in the country.
State-owned companies and the country’s new wealthy class may stand as barriers to change after benefiting from controls on borrowing and savings rates, underpriced resources and the absence of property taxes.
“Nowadays, stirring up vested interests is more difficult than stirring up one’s soul,” Li said. “But no matter how deep the water is, we must wade through because we don’t have other options -- it’s our nation’s fate and future that are at stake.”
Politburo members Wang Yang, who’s the former party secretary of Guangdong, Liu Yandong and former state planner Ma Kai also became vice premiers. One of the officials at that level, ranked higher than ministry heads, may serve as counterpart to U.S. Treasury Secretary Jacob J. Lew, due to visit Beijing on March 19 and 20.
Li, who was named as the top vice premier in 2008 and was previously a provincial leader, said the government would deepen changes to the country’s exchange-rate and interest-rate policies. Rate reform may squeeze profits at state-owned banks including Industrial & Commercial Bank of China Ltd. and Bank of China Ltd.
The world’s second-biggest economy faces rising risks of a financial crisis because of excessive credit, elevated property prices, declines in the labor force and limited productivity gains, according to a March 15 report from Nomura Holdings Inc. A slowdown in “reform momentum” after China joined the World Trade Organization in 2001 is holding the nation back, the bank said.