China, the most powerful emerging economy known for its expectations of double-digit growth rates, has lowered its 2015 economic growth expectations to about 7%.
Speaking at the opening of China’s annual parliamentary meeting in Beijing on March 5, Premier Li Keqiang promised to fight corruption and pollution, and stressed the need for more painful reforms to push for sustainable economic growth after three decades of impressive growth figures.
“China’s economic development has entered a new normal. Our country is in a crucial period during which challenges need to be overcome and problems need to be resolved,” Mr Li said.
It is the China’s slowest rate of expansion in a quarter of a century, which is the world’s second-largest economy.
China is targeting slower economic growth as it tackles “deep-seated” economic problems and reduces its reliance on polluting fuels such as coal.
“Systemic, institutional, and structural problems have become tigers in the road holding up development,” Li said.
In 2014, it was the first time when the Chinese economy missed a growth target since 1998. It grew at its slowest pace in 25 years in 2014; the growth rate was 7.4% and fell much short of the parliament’s announced target of 7.5%. Experts believe that is likely why Li hedged the target of 2015 by saying “approximately.”
To balance economic reform and sustain growth, the government said it would increase deficit spending, lower targeted trade and fixed-asset investment growth, and increase money supply if needed. On the other hand, it would try to reduce price controls on pharmaceuticals and energy and push to restructure its bloated state-owned enterprises.
“The deep growth target reduction is probably to manage the expectations of its people and the global community. It also signals that the bottoming-out of China is still nowhere in sight,” said Howie Lee, investment analyst at Phillip Futures.
According to official data, the Chinese government had aimed to create 10 million jobs in 2014, but ended up creating 13 million jobs, surpassing the initial target.