China Abandons Hard Growth Target, Shifts Stimulus Focus to Jobs

The Chinese government abandoned its decades-long practice of setting an annual target for economic growth amid the storm of uncertainty unleashed by the coronavirus pandemic, and said it would continue to increase stimulus. Speaking at the National People’s Congress in Beijing on Friday morning, Premier Li Keqiang delivered an annual policy address that instead laid out a renewed focus on maintaining employment and investment. Against a backdrop of escalating tensions with the U.S., Li said Beijing remains committed to implementing the terms of the ‘phase one’ trade deal. With more than $500 billion in infrastructure bonds to be issued this year and more monetary easing on the horizon, China is trying to cement a fragile domestic recovery without indulging in the kind of debt blowouts seen in the U.S. and Europe. The world’s largest exporter is therefore still reliant on other countries reining in the pandemic and a reboot of global trade. “We have not set a specific target for economic growth this year,” Li said, speaking in the Great Hall of the People. “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.” The shifting away from a hard target for output growth breaks with decades of Communist Party planning habits and is an admission of the deep rupture that the disease has caused. Economists surveyed by Bloomberg see an expansion of just 1.8% this year, the worst performance since the 1970s. At the same time, Li gave a precise figure for the targeted budget deficit, widening it to more than 3.6% of gross domestic product. Including the issuance of special bonds, that brings a broader measure of the deficit to more than 8%, according to Bloomberg Economics. Li’s address also contained announcement of plans to impose a national security law in Hong Kong, a development that pushed stocks there lower. The yuan was steady while the details on bond issuance helped drive yields on benchmark Chinese 10-year government bonds down to 2.625%, heading for the lowest in two weeks.   (bloomberg)