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China pledges stable growth, deepening reform

03-05-2014 10:10 BJT Special Report:2014 NPC & CPPCC Sessions |

BEIJING, March 5 (Xinhua) -- China keeps its economic growth target unchanged at around 7.5 percent this year as the government looks to achieve stable growth while driving through reforms for a more balanced model.

"On the basis of careful comparison and repeatedly weighing various factors as well as considering what is needed and what is possible, we set a growth target of around 7.5 percent," said the government work report delivered by Premier Li Keqiang at the parliament's annual session Wednesday.

This is the third consecutive year that the government put the goal at 7.5 percent.

China's economy expanded 7.7 percent last year, outrunning the government goal as it usually does, but a set of data that pointed to softening manufacturing activity in recent months renewed concerns on the growth outlook of the world's second largest economy.

"Despite the negative purchasing managers' index data in January and February, we believe China can achieve the target this year," noted Lu Ting, chief economist of Bank of America Merrill Lynch.

The bank is comfortable to maintain its 7.6 percent growth forecast, he added.

Describing the economy as at a critical juncture where the path upward is "particularly steep" amid challenges from at home and abroad, the premier stressed that China must keep economic development as the central task and maintain a "proper economic growth rate."

He reiterated that reform is the top priority for the government's work this year, four months after a key meeting last November outlined a wide-ranging reform package.

To ensure the economy stay within a "proper range," the government promised to continue to implement a proactive fiscal policy and a prudent monetary policy.

It projected a budget deficit of 1.35 trillion yuan (220.1 billion U.S. dollars), an increase of 150 billion yuan over last year, and a 13-percent rise in broad money supply in 2014, while vowing to keep inflation at around 3.5 percent and create 10 million more urban jobs to ensure the registered urban unemployment rate does not rise above 4.6 percent.

To shift the growth away from the export- and investment-led model, China will make domestic demand the "main engine" that drives growth and take investment as the "key" to maintain stable growth, the report said.

Although the policy tone is largely unchanged from last year, analysts expect authorities to put on more focus on deepening reforms this year, albeit in a gradual and cautious manner.

"The government's emphasis on a proper growth range allows leeways for pushing reform amid a stable macro-environment," noted Chi Fulin, head of the Hainan-based think tank China Institute for Reform and Development.

Among the reform steps planned for 2014, Li announced to set up a deposit insurance system that is considered a precondition for freeing deposit rates, the last and most important step of interest rate liberalization.

The decision came along with repeated promises to expand the floating range of exchange rates and move toward yuan convertibility under capital accounts.

The report said China will overhaul the current financing scheme for local governments to issue bonds, its latest step to contain the mounting debt problems.

Containing local government debt risks has been high on the government's agenda for 2014. It was listed as one of the government's six priorities at a tone-setting economic work conference in December.

Despite various estimates on the size of China's local government debt, the National Audit Office issued its own audit results at the end of last year, which estimated local government debt was 10.89 trillion yuan (1.78 trillion U.S. dollars) as of the end of June 2013.

An emerging consensus is that China's government debt is generally manageable but could get out of hand if its structural problems and lack of oversight are not addressed in a timely manner.

Li's report also detailed specific measures to address overcapacity, a major drag on the economy.

The government aims to reduce outdated production capacity of 27 million metric tons of steel, 42 million metric tons of cement and 35 million standard containers of plate glass.


Together with a range of other steps to address public concerns, Premier Li said China will "declare war" against pollution and penalize crooked officials "without mercy" in accordance with the law.

Just ahead of the parliament session, smog once again blanketed the Chinese capital for at least a week, highlighting the urgency for the country to take serious actions to curb pollution.

"The government will start by reducing PM10 and PM2.5 emissions," said the premier.

A total of 50,000 small coal-fired furnaces will be shut down this year and six million old high-emission vehicles will be removed from the roads, according to the report.

The government will also implement the clean water action plan, strengthen the protection of sources of drinking water, prevent and control water pollution in key river basins, and carry out land restoration, according to the report.

The National People's Congress, China's top legislature, started its annual session Wednesday morning in Beijing.


Editor:Zhang |Source: Xinhua

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