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China abandons growth target, lowers defense budget rise for 2020 amid pandemic

Premier Li Keqiang (Chatham House/WikiCommons)

China for the first time in decades will not have a GDP growth target for 2020 given the global economic uncertainties because of the Covid-19 pandemic, a government work report released by Premier Li Keqiang said Friday.

Premier Li read out the report at the launch of the shortened annual National People’s Congress (NPC) — China’s rubber stamp parliament — meeting in Beijing on Friday, pledging government support to help the outbreak-hit economy and setting out broad economic goals for the year.

In a draft budget report submitted to the NPC, the government also set a 6.6 percent growth rate for its defence budget, lower than the 7.5 percent rise in 2019, an outlay that’s closely followed globally.

The proposed defense budget stands at 1.268 trillion yuan ($178 billion), according to the draft budget.

China’s defense budget for 2019 was 1.19 trillion yuan, up 7.5 percent from 2018.

China has maintained single-digit growth in its annual defence budget since 2016.

It was expected that China will increase its defence budget at a lower rate year-by-year because of the Covid-19 pandemic, which killed and sickened more than 87000 and battered the Chinese economy into contracting.

The country’s economy shrank 6.8% in the first quarter of 2020 compared with a year earlier, as the novel coronavirus spread from the central Chinese city of Wuhan, the capital of Hubei province, where it emerged late last year.

“We have not set a specific target for economic growth this year. 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 was quoted as saying by official media while reading out the work report at the Great Hall of the People on Friday morning.

According to the report, China is targeting a 2020 budget deficit of at least 3.6% of GDP, above last year’s 2.8%, and fixed the quota on local-government special bond issuance at 3.75 trillion yuan ($527 billion), up from 2.15 trillion yuan.

China will also issue 1 trillion yuan in special treasury bonds for the first time this year.

Local government bonds could be mainly used to fund infrastructure projects, while special treasury bonds could be used to support firms and regions hit by the coronavirus outbreak, for subsidies to spur consumption or for boosting the capital structure of small banks, analysts told news agency Reuters.

The work report added that Chinese government has set a target of creating nine million new urban jobs, compared to 11 million last year, and a surveyed urban unemployment rate of around 6 percent, compared to 5.5 percent last year.

“We must be clear that efforts to stabilise employment, ensure living standards, eliminate poverty, and prevent and defuse risks must be underpinned by economic growth; so ensuring stable economic performance is of crucial significance,” the work report said.

“We need to pursue reform and opening up as a means to stabilise employment, ensure people’s well-being, stimulate consumption, energise the market, and achieve stable growth. We need to blaze a new path that enables us to respond effectively to shocks and sustain a positive growth cycle.”


© 2020 Hindustan Times