Experts say nation still on track to meet key development goals
China is on course to meet its important development goals despite the setback of the coronavirus pandemic, according to experts.
They were responding to the Government Work Report delivered by Premier Li Keqiang on Friday, the opening day of the 3rd session of the 13th National People's Congress, the nation's top legislature.
Li said China would work toward meeting the goals of becoming a moderately prosperous society and eliminating all extreme poverty in time for the 100th anniversary of the Communist Party of China next year, despite not setting a target for GDP this year.
Zhu Ning, deputy dean of the National Institute of Financial Research at Tsinghua University, said he was confident the goals would be met.
"We are more or less already there. I think it was important there was no growth target. I don't think there is a need for one now. We need to focus on the quality of growth from now on," he said.
Becoming a moderately prosperous society was originally defined as doubling 2010 GDP per capita income by the end of this year, in time for the CPC centennial anniversary next year.
Jeremy Stevens, Beijing-based chief China economist of Standard Bank, Africa's largest bank, said a lot of international commentators had become too obsessed with this.
"As far as I am concerned, the very specific target was always a red herring. In spirit it had been achieved already," he said.
George Magnus, a research associate at Oxford University's China Centre, said abandoning the target will be welcomed by economists.
"They will hope it is a precedent, allowing the authorities to focus better on the quality of growth and resource allocation," he said.
Li made clear in the report that China faced difficult global conditions, with many countries still in lockdown.
"At present and for some time to come, China will face risks and challenges like never before," Li said.
However, he added, "We have unique political and institutional strengths, a strong economic foundation, enormous market potential, and hundreds of millions of intelligent and hardworking people."
The work report prioritized job creation and set a target of creating 9 million new urban jobs this year, and to keep the surveyed urban unemployment rate at 6 percent.
According to Zhu of Tsinghua University, "This is clearly the top target for this year. Many people have lost their jobs during the lockdown. It is a less tangible target than GDP. Employment is a more fluid concept, with many migrant workers not counted in the employment survey."
In terms of fiscal stimulus, China intends to increase the central government fiscal deficit from 2.8 to 3.6 percent, which will inject 1 trillion yuan ( $140 billion) into the economy.
There will also be an increase in the quota of local government bond issuance, from 2.5 trillion yuan in 2019 to 3.75 trillion yuan this year. This is earmarked for modern infrastructure investment such as 5G base stations, water conservation and urban upgrading.
The overall focus is on tax cuts and other measures to increase consumption to get the demand side of the economy going again after the lockdown.
Yue Su, an economist with The Economist Intelligence Unit, an economics research organization, said this is in marked contrast to the 4 trillion yuan financial stimulus－then believed to be the largest in economic history anywhere in the world－following the global financial crisis, much of it being focused on investment and infrastructure.
"It is different from the 2009 stimulus package in that boosting consumption is being prioritized and not investment. More policies focusing on boosting income and consumption are to be announced in the coming months," she said.
Louis Kuijs, Hong Kong-based head of Asia for consultancy Oxford Economics, said that while the measures represented a "meaningful" easing of policy, they demonstrated that there was no major appetite in Beijing for the scale of fiscal intervention of 11 years ago.
"It reflects the fact that a big stimulus package remains unpopular in Beijing amid concerns about excessive leverage and financial instability. The work report emphasizes instead stability and security," he said.
Magnus, who also is a research associate at The School of Oriental and African Studies in London and a leading expert on the Chinese economy, said he believed the fiscal expansion may prove bigger than many are anticipating.
He said the target of 3.6 percent fiscal deficit was already more than the long-standing, government-imposed limit of 3 percent.
"The fiscal stance is the load-bearing part of the government's program in the work report," he said.
"It will likely turn out much larger once accounting allows for the additional bond issuance by central and local governments, tax and fee cuts, and public sector liabilities not included in the central government's own finances."
A number of commentators detected a different tone in this year's work report compared with previous ones.
Stevens at Standard Bank said it reflected that the government clearly recognized the fact that it was difficult to make predictions in the middle of a pandemic.
"The tone was certainly different. There is a recognition that the ability to control outcomes is absent in 2020, and so the role of the government in the economy has been recast to doing the best they can, and focusing on only the most important items," he said.
Zhu, a veteran watcher of work reports, agreed there was a significant change.
"There was more focus on sustainability and quality outcomes. Chinese officials are more used to numerical targets, but now need to pay attention to quality-related key performance indicators, so it will be a challenge for them," he said.
Even with the absence of a growth target, there was a consensus among economists that the work report did provide a platform for recovery.
Kuijs at Oxford Economics said he believes China's year-on-year GDP growth could hit 4 percent in the second half after contracting 6.8 percent in the first quarter.
"We expect this macro stance to support the domestic recovery that we expect to continue despite the challenging external context," he said.
However, many believe these external factors may prove to be the biggest brake on China's recovery.
"Although China has fared better than many developed economies during this crisis, it is still reliant on external demand for its exports in the immediate short term. It will take much longer for domestic consumers to provide that support," said Zhu.
Li said China would work toward meeting the goals of becoming a moderately prosperous society and eliminating all extreme poverty in time for the 100th anniversary of the Communist Party of China next year, despite not setting a target for GDP this year.
Zhu Ning, deputy dean of the National Institute of Financial Research at Tsinghua University, said he was confident the goals would be met.
"We are more or less already there. I think it was important there was no growth target. I don't think there is a need for one now. We need to focus on the quality of growth from now on," he said.
Becoming a moderately prosperous society was originally defined as doubling 2010 GDP per capita income by the end of this year, in time for the CPC centennial anniversary next year.
Jeremy Stevens, Beijing-based chief China economist of Standard Bank, Africa's largest bank, said a lot of international commentators had become too obsessed with this.
"As far as I am concerned, the very specific target was always a red herring. In spirit it had been achieved already," he said.
George Magnus, a research associate at Oxford University's China Centre, said abandoning the target will be welcomed by economists.
"They will hope it is a precedent, allowing the authorities to focus better on the quality of growth and resource allocation," he said.
Li made clear in the report that China faced difficult global conditions, with many countries still in lockdown.
"At present and for some time to come, China will face risks and challenges like never before," Li said.
However, he added, "We have unique political and institutional strengths, a strong economic foundation, enormous market potential, and hundreds of millions of intelligent and hardworking people."
The work report prioritized job creation and set a target of creating 9 million new urban jobs this year, and to keep the surveyed urban unemployment rate at 6 percent.
According to Zhu of Tsinghua University, "This is clearly the top target for this year. Many people have lost their jobs during the lockdown. It is a less tangible target than GDP. Employment is a more fluid concept, with many migrant workers not counted in the employment survey."
In terms of fiscal stimulus, China intends to increase the central government fiscal deficit from 2.8 to 3.6 percent, which will inject 1 trillion yuan ( $140 billion) into the economy.
There will also be an increase in the quota of local government bond issuance, from 2.5 trillion yuan in 2019 to 3.75 trillion yuan this year. This is earmarked for modern infrastructure investment such as 5G base stations, water conservation and urban upgrading.
The overall focus is on tax cuts and other measures to increase consumption to get the demand side of the economy going again after the lockdown.
Yue Su, an economist with The Economist Intelligence Unit, an economics research organization, said this is in marked contrast to the 4 trillion yuan financial stimulus－then believed to be the largest in economic history anywhere in the world－following the global financial crisis, much of it being focused on investment and infrastructure.
"It is different from the 2009 stimulus package in that boosting consumption is being prioritized and not investment. More policies focusing on boosting income and consumption are to be announced in the coming months," she said.
Louis Kuijs, Hong Kong-based head of Asia for consultancy Oxford Economics, said that while the measures represented a "meaningful" easing of policy, they demonstrated that there was no major appetite in Beijing for the scale of fiscal intervention of 11 years ago.
"It reflects the fact that a big stimulus package remains unpopular in Beijing amid concerns about excessive leverage and financial instability. The work report emphasizes instead stability and security," he said.
Magnus, who also is a research associate at The School of Oriental and African Studies in London and a leading expert on the Chinese economy, said he believed the fiscal expansion may prove bigger than many are anticipating.
He said the target of 3.6 percent fiscal deficit was already more than the long-standing, government-imposed limit of 3 percent.
"The fiscal stance is the load-bearing part of the government's program in the work report," he said.
"It will likely turn out much larger once accounting allows for the additional bond issuance by central and local governments, tax and fee cuts, and public sector liabilities not included in the central government's own finances."
A number of commentators detected a different tone in this year's work report compared with previous ones.
Stevens at Standard Bank said it reflected that the government clearly recognized the fact that it was difficult to make predictions in the middle of a pandemic.
"The tone was certainly different. There is a recognition that the ability to control outcomes is absent in 2020, and so the role of the government in the economy has been recast to doing the best they can, and focusing on only the most important items," he said.
Zhu, a veteran watcher of work reports, agreed there was a significant change.
"There was more focus on sustainability and quality outcomes. Chinese officials are more used to numerical targets, but now need to pay attention to quality-related key performance indicators, so it will be a challenge for them," he said.
Even with the absence of a growth target, there was a consensus among economists that the work report did provide a platform for recovery.
Kuijs at Oxford Economics said he believes China's year-on-year GDP growth could hit 4 percent in the second half after contracting 6.8 percent in the first quarter.
"We expect this macro stance to support the domestic recovery that we expect to continue despite the challenging external context," he said.
However, many believe these external factors may prove to be the biggest brake on China's recovery.
"Although China has fared better than many developed economies during this crisis, it is still reliant on external demand for its exports in the immediate short term. It will take much longer for domestic consumers to provide that support," said Zhu.
