China sets 2016 growth target at National People’s Congress

Delivering the Communist Party's annual work report to China's annual National People's Congress, premier Li Keqiang said the world's second largest economy would struggle in the face of difficult global circumstances.

Addressing nearly 3,000 delegates in the cavernous, red flag-lined Great Hall of the People, premier Li set out a growth target of between 6.5 and 7 per cent for 2016. Last year, the economy grew by 6.9 per cent, its lowest expansion in 25 years.

Delegates diligently studied the work report as he spoke, applauding regularly as if on cue. Many wore traditional costumes or military uniform, although the blue business suit has usurped the grey or blue Mao suit, known in China as the Zhongshan suit, which dominated the cadre's wardrobe in the more doctrinaire days of Chairman Mao Zedong.

"While dealing with the slowdown in economic growth, making difficult structural adjustments, and absorbing the effects of previous economic stimulus policies, China was also confronted with many difficult problems and choices in the running of the economy, and this called for effective responses," Mr Li reported to his comrades, representing the top leaders of the 78-million member Communist Party.

Economic growth in China is closely studied to see what impact it will have on the broader global economy, including the eurozone.

After days of hazardous smog shrouding the capital, the sky was clear as delegates gathered in the Great Hall of the People. One of the measures outlined in the government’s next five-year plan, which was outlined at the same time as the government report, was to cut pollution from this year to the end of 2020 by 18 per cent.

Challenges

Mr Li painted a picture of the serious challenges facing the Chinese economy.

“Growth in investment is sluggish, overcapacity is a serious problem in certain industries, some enterprises are facing difficulties in production and operations, growth prospects are mixed for different regions and different industries, notable imbalances exist between government revenue and expenditures, and there are latent risks in the financial and other sectors,” he warned.

He outlined a plan to deal with the bloated, out-dated state-owned industries such as steelworks, cement factories and coalmines, and said China would have to lay off millions to modernise its industries, although provision would be made for those losing their jobs.

“We will address the issue of ‘zombie enterprises’ proactively yet prudently by using measures such as mergers, reorganisations, debt restructuring, and bankruptcy liquidations,” he said. Earlier this week, the government announced that 1.8 million workers would lose their jobs in the steel and coal industries.

He pledged to expand domestic consumption and use effective investment to support growth this year, while opening manufacturing and services to foreign investors.

There were also provisions for poverty reduction; China’s widening wealth gap has become a source of deep concern.

“This year, we will help more than ten million rural residents lift themselves out of poverty, including over two million poor residents who are to be relocated from inhospitable areas, and continue to rebuild the dilapidated housing of poor rural households. Central government funds for poverty alleviation efforts will be increased by 43.4 per cent,” he said.

As previously flagged, Mr Li said China would raise military spending by 7.6 per cent this year, its lowest increase in six years, but the slower budget increase was unlikely to give the country’s neighbours too much solace as he pledged to to protect China’s maritime rights amid disputes in the East and South China Seas and improve intelligence gathering.

The 954.35 billion yuan (€133.25 billion) figure is around one quarter of the United States defence budget.

World’s largest military

President Xi Jinping as embarked on a modernising programme of the People’s Liberation Army, the world’s largest military, cutting 300,000 jobs and rejuvenating its Soviet-style command structure, and there were calls in the state media for another double-digit percentage spending increase.

“We will work to make the military more revolutionary, modern, and well-structured in every respect, and remain committed to safeguarding national security,” he said.

He repeated Beijing's mantra on self-ruled Taiwan, which recently elected by a landslide win president Tsia Ing-wen, of the pro-independence DPP party, saying China would fight any push by Taiwan to formalise its split from the mainland.

“We will remain committed to our major policies on Taiwan. . . oppose separatist activities for the independence of Taiwan, safeguard China’s sovereignty and territorial integrity, maintain the peaceful growth of cross-Straits relations, and safeguard peace and stability in the Taiwan Straits,” he said.