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China: Chinese leadership cuts main economic targets for 2015

March 5, 2015

Premier Li Keqiang disclosed the long-awaited list of economic targets for this year along with the central government’s budget during the third session of the 12th National People’s Congress (NPC), which ran from 5 to 15 March. The Premier also reaffirmed in the all-important Government Work Report, that the government will continue to implement proactive fiscal and prudent monetary policies.

The government cut the economic growth target for this year from 7.5% to “approximately” 7.0%, which represents the lowest target growth rate since 2004, while the 2015 inflation goal was lowered to 3.0% (2014: 3.5%). Although the M2 growth target was revised downward to 12.0% (2014: 13.0%), Premier Li declared that this figure could be “slightly higher” depending on the economy’s needs. Moreover, he affirmed that the government would adopt a “flexible approach” in the use of monetary policy tools, suggesting that more cuts to the main policy rates and the reserve requirement ratio could be in the pipeline.

The goal for the total volume of merchandise exports and imports for this year was revised down from a 7.5% expansion in 2014 to a 6.0% increase. The target growth for nominal fixed-asset investment was lowered by 2.5 percentage points to 15.0%, while the growth target for retail sales was cut from 14.5% to 13.0%. The government kept last year’s goal of creating 10 million new urban jobs in order to maintain the registered urban unemployment rate at or below 4.5%. Moreover, the government will continue to develop low-income housing.

On the budgetary side, the Chinese government projected a fiscal deficit of CNY 1.62 trillion (USD 220 billion) for this year (equivalent to around 2.3% of GDP), which exceeds the CNY 1.35 trillion goal that was set for 2014 (around 2.1% of GDP). While the projected budget deficit would imply a mildly proactive fiscal policy for this year, it did not meet analysts’ expectations of a bolder stimulus from the government.

In the same conference, Premier Li unveiled new measures to boost household income and improve the social security system, which corroborate the perception that the government is willing to give consumption a greater role. That said, the government stated that it would increase investment in infrastructure projects and adopt a more accommodative approach to property market policies.

The Government Work Report listed a series of initiatives to push forward China’s reform agenda in many areas such as tax policies, state-owned enterprises, public administrations, the financial system, and price controls, among others. Premier Li also vowed to accelerate China’s integration into the global economy and restated that authorities would continue the anti-corruption campaign.

Overall, the targets unveiled by Premier Li were broadly in line with analysts’ expectations. However, some analysts warn that it will be difficult to achieve a growth rate of 7.0% this year as the economy is facing severe downside risks, particularly in the property sector.

FocusEconomics Consensus Forecast panelists projection is in line with the Chinese government’s 2015 growth target of 7.0% and expect GDP to expand 7.0% in 2015, which is unchanged from last month’s estimate. In 2016, the panel foresees slightly lower economic growth of 6.8%.


Author: Ricard Torné, Lead Economist

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China Politics Chart


China Other1 March 2015

Note: Year-on-year changes of GDP in % and official GDP growth target rate.
Source: National Bureau of Statistics of China (NBS), Government of People’s Republic of China and FocusEconomics Consensus Forecast.


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