China’s economic performance is diverging across provinces as challenges rise and “sluggish” global growth weighs on prospects, Premier Li Keqiang said.
“There are both difficulties and hopes,” Li told reporters at his annual news conference in Beijing Wednesday. China is still at a stage of industrialization and urbanization, and retains room to grow on those fronts, while new growth drivers will also help fuel the nation’s expansion.
While there will be small “ups and downs” in the nation’s growth, China will “employ innovative means” to support the economy if growth drops out of its normal range.
Li got his weakest support yet for his annual economic work report — at 98.4 percent, the kind of disapproval rate a U.S. president could only dream of in Congress. He’s striving to restructure China’s economy away from a over-reliance on investment and cheap exports after growth slumped to a 25-year low last year.
China faces headwinds from slumping exports and stocks, to slowing industrial production and retail sales. Currency volatility and surging capital outflows following a shock devaluation last year have prompted plans to draft a Tobin tax on currency trading.
The government is committed to delivering at least 6.5 percent average expansion over the next five years, a target that risks fueling debt and adding to depreciation pressure on the yuan. Gavekal Dragonomics calls the target “incredible.” JPMorgan Chase & Co. says a sustainable pace is “much lower” than the 6.5 percent to 7 percent range officials are targeting for this year.
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Central bank Governor Zhou Xiaochuan said Saturday that excessive monetary policy stimulus wasn’t needed to meet the target and that, barring big economic or financial turmoil, the central bank would keep prudent monetary policy.
Zhou has already stepped up efforts to cushion the economic slowdown, announcing on Feb. 29 a 0.5 percentage point cut to the amount of deposits banks must hold as reserves. An income-tax overhaul is planned to boost consumption and Finance Minister Lou Jiwei has said it’s necessary to increase government borrowing to help other parts of the economy reduce debt.
–With assistance from Keith Zhai To contact Bloomberg News staff for this story: Kevin Hamlin in Beijing at firstname.lastname@example.org. To contact the editors responsible for this story: Malcolm Scott at email@example.com, Brendan Scott
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