In what is the lowest growth target set in decades, Chinese Premier Li Keqiang presented a report stating that the country will target a growth rate of near 5.5% for the upcoming financial year. The last time China had set such a modest growth rate was in 1991. The report was tabled in the fifth session of the 13th National People’s Congress. The Chinese government had set a target of 8.1% in the previous year.
The rate cut is understandable given two disastrous waves of the COVID-19 pandemic that has affected demand across the globe and global inflation aggravated by the ongoing Russia-Ukraine conflict. However, the Chinese premier did not mention the war as one of the causes for this subdued growth forecast.
As part of the growth plan, the Chinese state news agency Xinhua said that this growth will mean 11 million new jobs in the urban areas and a moderate increase in consumer price index by 3%.
Reports cited that in the ‘Government Work Report’, the word ‘stability’ was mentioned 76 times and it was instructed that all government departments take initiatives to stabilise the economy. Chinese being the second largest world economy is essential for the global supply of goods. The officials maintained that although the growth target has suffered a slump, it will outpace most of the major economies of the world.
In order to achieve the same, the government is likely to go for tax cuts and lowering of interest rates. According to analysts, lower interest rates will support borrowing and hence increase spending by households. In the last fiscal, to ease the operational distress of businesses, the Chinese government had cut interest rates by 0.1% on corporate loans.
Further to ease the hostile macroeconomic situation, the Chinese government will also lower auction prices of land to bolster growth and stroke up investor sentiments.
Reuters reported that the country’s exports growth declined in the first two months of the calendar year 2022 to 16.3% from 20.9% in December 2021. At the same time, the imports increased by 15.5% in the first two months of 2022 compared to 19.5% in December 2021.