China Sets 7.5 Percent Growth Target as Challenges Mount

Tuesday, 04 Mar 2014 08:31 PM

 

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China retained a target for 7.5 percent economic growth in 2014, signaling limits on the leadership’s efforts to curb pollution and credit expansion in the world’s second-largest economy.

The goal was given in a work report that Premier Li Keqiang will deliver to the annual meeting of the legislature Wednesday in Beijing. Li said the nation needs stable growth to ensure jobs. The inflation target is 3.5 percent.

Maintaining a pace of expansion close to last year’s 7.7 percent would help sustain demand for oil and iron ore and support a global economy that’s forecast by the International Monetary Fund to accelerate. At the same time, analysts from UBS AG to Societe Generale SA say a lower goal would’ve been more in keeping with the government’s pledge to move away from growth at all costs.

“This is going to send a message to the market that the government will do whatever it takes to prevent growth from slowing down,” Yao Wei, China economist at Societe Generale in Hong Kong, said before the report. “Whatever it takes means they wouldn’t care so much about debt — they’d even sacrifice reform progress to achieve that.”

Asian stocks rose, with the regional index posting its biggest one-day gain in more than a week, after the Chinese report, a rebound in global equities and as concern over Ukraine eased. The MSCI Asia Pacific Index climbed 0.8 percent by 8:17 a.m. Wednesday in Beijing.

Ensuring Employment

Li’s work report, which opens the annual meeting of the National People’s Congress, is his first since the 58-year-old was named premier toward the end of last year’s legislative gathering. He succeeded Wen Jiabao, 71, as part of the Communist Party’s once-a-decade leadership handover.

The 7.5 percent target “is in keeping with our goal of finishing building a moderately prosperous society in all respects, and it will boost market confidence and promote economic structural adjustment,” Li said. “More importantly, stable growth ensures employment.”

China’s ability to sustain its pace of growth in coming years will help determine the path of a global economy and emerging markets roiled by events including the U.S. Federal Reserve’s tapering of monetary stimulus, turmoil in Ukraine and a currency devaluation in Argentina.

Li and President Xi Jinping are trying to balance clampdowns on credit and shadow banking, as well as the broadest economic-policy changes since the 1990s, with sustaining a “reasonable” pace of expansion. Previous data this year in China have shown a slowdown in manufacturing, while trade and credit expansion exceeded estimates.

“China is still a developing country in the primary stage of socialism, and development remains the key to solving all our country’s problems,” Li said in the report. “We must keep economic development as the central task and maintain a proper economic growth rate.”

© Copyright 2014 Bloomberg News. All rights reserved.

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