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China promises growth but target unchanged

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(Globalpost/GlobalPost)

China set an unchanged growth target of 7.5 percent for 2013, Premier Wen Jiabao said Tuesday, as officials seek to nurture recovery while revamping the model of the world's second-largest economy.

Increasing material prosperity is a key part of the ruling Communist Party's claim to legitimacy in China, where hundreds of millions of people have been lifted out of poverty over the past three decades.

But the Chinese economy expanded 7.8 percent in 2012, its worst performance for 13 years, in the face of weakness at home and in key overseas markets after growth of 9.3 percent in 2011 and 10.4 percent in 2010.

It picked up speed at the end of last year, increasing optimism among analysts that the 2013 figure will come in stronger, with some expecting it to reach eight percent or higher.

Nonetheless the government took a more conservative stance with the target, as it often does -- it is regularly exceeded in practice.

"We deem it necessary and appropriate to set this year's target for economic growth at about 7.5 percent, a goal that we will have to work hard to attain," Wen said in his "work report" to the opening of the National People's Congress, China's rubber-stamp parliament.

He said China would run an increased budget deficit of 1.2 trillion yuan ($193 billion) this year, up by 400 billion yuan on 2012, "to increase spending to ensure and improve people's well-being".

Bank of America Merrill Lynch said the projected deficit -- equivalent to two percent of GDP, up from 1.6 percent -- was welcome as part of a "proactive" fiscal policy. It expects the economy to grow 8.1 percent this year.

Even with the proposed increase, China would still be in better shape than other top global economies. The US budget deficit, for example, is projected at 5.3 percent of GDP this year, the Congressional Budget Office said last month.

In his speech, Wen described China's proposed deficit as "overall at a safe level".

Chinese authorities have vowed to change the country's economic structure, which for decades was led by exports and massive state-directed investments, into one more responsive to the growing needs of a consumer-driven society.

Wen re-iterated that message in his speech, saying: "We should energetically change the growth model.

"We should enhance people's ability to consume, keep their consumption expectations stable, boost their desire to consume, improve the consumption environment and make economic growth more consumption-driven."

He also said China planned to add about nine million jobs in urban areas to keep the official jobless rate there at or below 4.6 percent, and ensure that real per capita income for both urban and rural residents increases.

Analysts said the 2013 economic growth target was no surprise and should be easily achievable.

"Currently, we are still at the beginning of the economic recovery, so for a new government, it will be their priority to maintain the momentum in the domestic economic recovery," Sun Junwei, a Beijing-based economist with British bank HSBC, told AFP.

Keeping last year's target "offers more room for policy reforms and lifting the quality of economic growth", she said.

Prior to the 7.5 percent targets for 2012 and 2013, they had been set at around eight percent for seven straight years, according to the official Xinhua news agency.

China also set its inflation target for this year at 3.5 percent. The target is lower than last year's, which was set at 4.0 percent. China's actual inflation rate for 2012 came in well below that, at 2.6 percent.

"China is still under considerable inflationary pressure this year," Wen said, sounding the alarm on price rises.

Analysts were less concerned.

Sun said given that the current economic recovery was "relatively moderate", price increases were unlikely to get out of hand, and she expected the figure to be about three percent this year.

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http://www.globalpost.com/dispatch/news/afp/130305/china-promises-growth-target-unchanged-0