China’s economy not headed for hard landing, says economic planner
by Agency Staff,
2016-03-07 05:43:09.0
BEIJING — China’s economy is not headed for a hard landing and is not dragging on the global economy, China’s top economic planner said on Sunday, but uncertainty and instability in the global economy do pose a risk to the country’s growth.
China acknowledged at the weekend that it faced a tough battle to keep the world’s second-largest economy growing by at least 6.5% in the next five years, while pushing hard to create more jobs, as well as restructuring state-owned enterprises.
The comments, as Beijing kicked off its annual national parliament, underscored the challenges facing China as its economy changes from an investment-and export-focused economy to one based more on services and consumption.
"China will absolutely not experience a hard landing," said Xu Shaoshi, head of the National Development and Reform Commission. "These predictions of a hard landing are destined to come to nothing."
China’s economy grew 6.9% last year, the slowest pace in a quarter of a century, but still comfortably the fastest among major economies.
It has set a growth target of 6.5% to 7% for this year, introducing a band rather than a hard target as it seeks greater flexibility in juggling growth, job creation and restructuring of a host of "zombie companies" in bloated industries.
At the weekend, Premier Li Keqiang outlined a series of targets on issues such as energy consumption, job creation and inflation, but few details on how they would be met. Many investors had been hoping China would post an aggressive target for fiscal spending to prop up growth. But the draft goal of running a fiscal deficit equivalent to 3% of gross domestic product, while up from the previous year’s target of 2.3%, disappointed some.
Mr Xu emphasised China would work to improve the "efficiency" of government investment, suggesting a desire for more targeted spending. That would be a contrast to the last stimulus injection after the global financial crisis when Chinese local governments built ghost cities, roads to nowhere and airports to juice growth. China has foreign exchange reserves of more than $3-trillion to tap, but a sharp decline in reserves in the past 18 months, as Beijing sought to support its yuan has rattled some investors.
Central bank vice-governor Yi Gang reiterated on Sunday Beijing would keep the yuan basically stable and there was no basis for continued depreciation.
The state of China’s economy and Beijing’s ability to manage it were key talking points at a Group of 20 finance ministers and central bankers in Shanghai last month.
Mr Li said China had the confidence to handle the complexities at home and abroad while pressing ahead with reforms.
"China’s economy performance has stayed at a reasonable range (since 2015)," Mr Xu said, adding that the Chinese economy should not be viewed through traditional perspectives.
"First, we should look from the angle that the economy has entered the ‘new normal’ period," he said, in which growth rates have shifted and the economy’s growth engines are changing towards services from investment.
Beijing has flagged major job losses in the country’s bloated coal and steel industries. But plans to reduce industrial overcapacity were unlikely to result in large-scale layoffs, Mr Xu said.
Economic growth would create more jobs and help offset the effect of capacity cuts.
Nonetheless, the broader world economy posed challenges to China this year, he said.
"We estimate the slow recovery and low growth rates in the world’s economy will continue for a period," he said. "Also, we could not overlook the risks from unstable (global) financial markets, falling prices of commodities and risks of geopolitics." China also plans to launch several mixed ownership pilot programmes in the oil, natural gas and rail sectors, part of the most far-reaching reforms of its sprawling and inefficient state sector in two decades.
Reuters
Xu Shaoshi. Picture: EPA/WU HONG
BEIJING — China’s economy is not headed for a hard landing and is not dragging on the global economy, China’s top economic planner said on Sunday, but uncertainty and instability in the global economy do pose a risk to the country’s growth.
China acknowledged at the weekend that it faced a tough battle to keep the world’s second-largest economy growing by at least 6.5% in the next five years, while pushing hard to create more jobs, as well as restructuring state-owned enterprises.
The comments, as Beijing kicked off its annual national parliament, underscored the challenges facing China as its economy changes from an investment-and export-focused economy to one based more on services and consumption.
"China will absolutely not experience a hard landing," said Xu Shaoshi, head of the National Development and Reform Commission. "These predictions of a hard landing are destined to come to nothing."
China’s economy grew 6.9% last year, the slowest pace in a quarter of a century, but still comfortably the fastest among major economies.
It has set a growth target of 6.5% to 7% for this year, introducing a band rather than a hard target as it seeks greater flexibility in juggling growth, job creation and restructuring of a host of "zombie companies" in bloated industries.
At the weekend, Premier Li Keqiang outlined a series of targets on issues such as energy consumption, job creation and inflation, but few details on how they would be met. Many investors had been hoping China would post an aggressive target for fiscal spending to prop up growth. But the draft goal of running a fiscal deficit equivalent to 3% of gross domestic product, while up from the previous year’s target of 2.3%, disappointed some.
Mr Xu emphasised China would work to improve the "efficiency" of government investment, suggesting a desire for more targeted spending. That would be a contrast to the last stimulus injection after the global financial crisis when Chinese local governments built ghost cities, roads to nowhere and airports to juice growth. China has foreign exchange reserves of more than $3-trillion to tap, but a sharp decline in reserves in the past 18 months, as Beijing sought to support its yuan has rattled some investors.
Central bank vice-governor Yi Gang reiterated on Sunday Beijing would keep the yuan basically stable and there was no basis for continued depreciation.
The state of China’s economy and Beijing’s ability to manage it were key talking points at a Group of 20 finance ministers and central bankers in Shanghai last month.
Mr Li said China had the confidence to handle the complexities at home and abroad while pressing ahead with reforms.
"China’s economy performance has stayed at a reasonable range (since 2015)," Mr Xu said, adding that the Chinese economy should not be viewed through traditional perspectives.
"First, we should look from the angle that the economy has entered the ‘new normal’ period," he said, in which growth rates have shifted and the economy’s growth engines are changing towards services from investment.
Beijing has flagged major job losses in the country’s bloated coal and steel industries. But plans to reduce industrial overcapacity were unlikely to result in large-scale layoffs, Mr Xu said.
Economic growth would create more jobs and help offset the effect of capacity cuts.
Nonetheless, the broader world economy posed challenges to China this year, he said.
"We estimate the slow recovery and low growth rates in the world’s economy will continue for a period," he said. "Also, we could not overlook the risks from unstable (global) financial markets, falling prices of commodities and risks of geopolitics." China also plans to launch several mixed ownership pilot programmes in the oil, natural gas and rail sectors, part of the most far-reaching reforms of its sprawling and inefficient state sector in two decades.
Reuters
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