China reveals its economic recovery plan for 2020 but did not give any target GDP for the year due to the coronavirus crisis.
“I would like to point out that we have not set a specific target for economic growth this year,” Chinese Premier Li Keqiang said in a work report translated to English and delivered on Friday.
“This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment,” Li said.
The statements are part of the annual parliamentary meeting in China. The event was postponed for two months due to the coronavirus pandemic that sprang in China in 2019 and spread into the world.
Before the report was released, analysts predicted that Li might reveal the country’s GDP target for a period other than 2020 itself. GDP soared by 6.1% in 2019 and achieved the official target range of 6% to 6.5%.
“The fact that they dropped the GDP growth target is a good thing if it means that they really intend to let sustainable demand — consumption, exports, and private sector investment — drive growth,” Michael Pettis, professor of finance at Peking University, said Friday in an email.
“If they have only dropped it temporarily while they try to figure the full impact of the pandemic, and later select an implicit target that relies heavily on non-productive spending on infrastructure and real estate, then this really doesn’t change anything,” Pettis said.
Moreover, China’s economy had a 6.8% contraction in the first quarter. Unemployment remained near historic highs. Officials expressed concern about the slow growth from the spread of the virus overseas.
Meanwhile, economists reduced their growth predictions for the official GDP. In late March, the China International Capital Corporation (CICC) changed its real GDP growth estimate from 6.1% to 2.6%.
Employment as major priority
Chinese officials disclosed specific targets for areas such as employment and inflation.
Li said that keeping citizens employed will be a top priority. He added that Beijing aims to achieve an unemployment rate of 6%, based on the official urban survey.
The target increased from last year’s objective of 5.5%. Meanwhile, the number of new jobs pledged fell from 11 million to “over 9 million.” The consumer price index target reached around 3.5%.
COVID-19 started in Wuhan, China. The coronavirus outbreak led to the death of more than 4,600 people in the country. When it became a global pandemic, the crisis resulted in more than five million confirmed cases and killed over 330,000 people around the world.
Li also presented a plan for moderate increase in government assistance for economic growth. He pointed out that the fiscal deficit will rise from last year by 1 trillion yuan for a deficit-to-GDP ratio of more than 3.6%.
“On top of this, one trillion yuan of government bonds for Covid-19 control will also be issued,” Li said. He described them as “extraordinary measures for an unusual time.”
He noted that special local government bonds for project development will soar by 1.6 trillion yuan over last year.
China will ramp up infrastructure construction which can boost the reach of 5G and electric car charging facilities, according to Li.