China lowers growth target amid trade and debt fears

China lowers growth target amid trade and debt fears

China will cut company taxes and employer social insurance contributions paid on behalf of workers by almost 2 trillion yuan (S$403 billion), according to a government report presented to the congress. It is also the lowest number in the 15 years the survey has been produced, Hurun said.

The government aims to create more than 11 million new urban jobs this year and keep the urban unemployment rate within 4.5 per cent, in line with its 2018 goals.

China sits on an enormous pile of debt, with fears also building that a significant amount of domestically focused companies are too highly leveraged and are at the risk of default.

In a rare admission of weakness from the Chinese state, Premier Li Keqiang said that the trade war with the United States, which has seen both countries swap tit-for-tat tariffs on a combined $360 billion of goods, was having a material negative impact on the economy.

China will also boost its military budget by 7.5% to 1.2trn yuan, down from last year's 8.1% rise - which was the largest spending increase in three years.

Li said Beijing is closely monitoring the job situation at exporting companies heavily exposed to the U.S. market.

But with the economy losing steam, Value-Added Tax and social security fees will be cut, in a bid to stave off job losses and the related risk of unrest.

The lower tax revenue and higher government spending mean Beijing has increased its budget deficit target to 2.8 percent of GDP from last year's 2.6 percent.

Describing China's defense budget increase as reasonable and appropriate, Zhang Yesui, spokesperson for the annual session of the 13th NPC, said the raise aims to "meet the country's demand in safeguarding national security and military reform with Chinese characteristics".

Over the past year, China's central bank has cut the reserve requirements for commercial lenders five times to spur loans to small and private companies - vital for growth and jobs.

Of China's 31 provinces, regions and municipalities, 24 have already lowered their growth targets for this year, especially export-driven coastal areas.

The premier promised to "promote China-US trade negotiations", but gave no details of talks aimed at ending the fight with President Donald Trump over Beijing's technology ambitions and complaints it steals or pressures companies to hand over technology.

The employment rate is one alternative indicator to GDP growth that economic planners have put added emphasis on in recent months due to its importance for maintaining social stability.

"We will implement the military strategy for the new era, strengthen military training under combat conditions, and firmly protect China's sovereignty, security, and development interests", he said.

China might be preparing to offer measures like the further opening of the auto and financial sector to foreign investment and cutting of tariffs of foreign products as concessions in negotiations with the United States, and thus Li had no incentive to make pledges in these areas before a deal is reached.

Related Articles