China targets 6 to 6.5% in shadow of trade war with U.S.

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The government hopes to counter the downward pressure on the economy by shoring up domestic demand, using monetary and fiscal instruments at its command

China on March 5 set an economic growth target of 6.0 to 6.5% for 2019, after factoring in a slew of headwinds, including the trade war with the United States, and financial bottlenecks for its private enterprises.

The growth rate estimate, which was lower than last year’s projection of “about 6.5%,” was revealed in the government work report, which was delivered by Prime Minister Li Keqiang during the opening session of the National People’s Congress (NPC)—China’s parliament.

Analysts say that the anticipated growth rate is in tune with China’s strategic goal — of doubling the size of the economy in 2020 from the base figure of 2010, which would require a minimum growth rate of 6.2%.

China’s GDP growth target will be tested when the full impact of the trade war with the United States would be felt in the first half of this year. The Chinese government hopes to counter the downward pressure on the economy by shoring up domestic demand, using monetary and fiscal instruments at its command.

Stimulate domestic growth

Beijing has targeted the creation of 11 million new urban jobs this year, compared to the actual 13.6 million jobs that were generated last year. China has already stepped up lending to stimulate domestic growth. The work report called upon commercial banks to increase loans to small and medium-sized companies by 30 % this year — a potential high growth segment.

The work report targeted an urban unemployment rate of “about 5.5%,” which higher than the actual unemployment rate of 5.1% last year. The government also pledged to keep inflation under 3%.

Defence budget

A separate budget report released at the start of the NPC session said that China’s 2019 defense spending will rise 7.5% from 2018. Last year the defence spending had risen by 8.1%. The $ 177.55 billion defence budget meant that “…China’s military development is decided by its defence needs…and that it will not join an arms race,” the Hong Kong-based South China Morning Post (SCMP) quoted Lieutenant-General He Lei, former vice-president of the Academy of Military Science of the People’s Liberation Army (PLA), as saying.

Observers say that China’s defence budget does not necessarily reveal allocations for strategic projects such as the construction of aircraft carriers and stealth fighters, which are part of China’s military modernisation drive.

Compared to China’s military spending, U.S. President Donald Trump has backed plans to request US$750 billion from the Congress for defence spending in 2019.

Chinese state media has earlier reported that China has plans to build up to six aircraft carriers by 2035. The SCMP quoted its military source as saying, “It’s an open secret that the cost of the aircraft carriers’ development and construction would not be counted into the budget, but the navy needs to deploy specific flotillas, manpower and training to support this, which should fall under the annual budget”.

Protect national sovereignty

During his work report, Mr. Li reinforced China’s rejection of Taiwan’s independence. “We resolutely oppose Taiwan independence and are determined to protect our national sovereignty and territorial integrity,” he said.

In a speech in January, Chinese President Xi Jinping had reiterated Beijing’s call for a peaceful unification with Taiwan on the “one-country-two-systems” formulation — a template that had earlier led to the merger of Hong Kong and Macao to the mainland. But he also warned that China reserved the right to use force.

Premier Li Keqiang also said that relations with the U.S. were tense, and there were maritime disputes with Southeast Asian countries. But, “China is determined to protect its sovereignty, security and development interests,” he observed

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