China's budget deficit set to grow
CHINA plans to run its biggest budget deficit this year since the global financial crisis, stepping up spending as Premier Li Keqiang signalled that the lowest rate of growth in a quarter of a century is the "new normal" for the world's No. 2 economy.
Speaking at the opening of the country's annual parliamentary meeting yesterday, Mr Li announced a growth target of around 7 per cent for this year, below the 7.5 per cent goal that was narrowly missed last year.
"The downward pressure on China's economy is intensifying," Mr Li told around 3,000 delegates gathered at the Great Hall of the People to the west of Beijing's Tiananmen Square.
"Deep-seated problems in the country's economic development are becoming more obvious. The difficulties we are facing this year could be bigger than last year. The new year is a crucial year for deepening all-round reforms."
Outlining the government's policy priorities for this year, he said there would be no let-up in an anti-corruption drive and vowed to fight pollution, which he called "a blight on people's quality of life and a trouble that weighs on their hearts".
Stressing the need to put the economy on a more sustainable footing after three decades of breakneck growth, Mr Li said priorities included pushing ahead with reforms of the giant state-owned enterprises that still bestride the economy and liberalising the banking system and financial markets.
"In order to defuse problems and risks, avoid falling into the 'middle income trap', and achieve modernisation, China must rely on development, and development requires an appropriate growth rate," he said. "At the same time, China's economic development has entered a 'new normal'."
The annual full meeting of the National People's Congress is a colourful event, drawing delegates from all over China, some in traditional ethnic costumes, to the vast hall, a monument to 1950s Communist architecture.
Its role is largely to endorse policy decisions already agreed on by the party hierarchy.
In the short term, China's top policymakers are grappling to sustain an economy weighed down by a cooling property market, high debt levels and excess factory capacity. Over the longer run, they are seeking to restructure it to boost consumption at the expense of exports and investment.
Underscoring the challenges faced in striking that balance, the People's Bank of China cut interest rates over the weekend for the second time in three months.
Adding a fiscal boost to the central bank's monetary support, Beijing plans to lift government spending to 17.15 trillion yuan (S$3.7 trillion) this year, an increase of 10.6 per cent on last year's.
That will mean raising the budget deficit to 1.62 trillion yuan, or around 2.3 per cent of gross domestic product, compared with 2.1 per cent last year and the widest since 2009, when Beijing unleashed a stimulus splurge in response to the financial crisis.
China's economy grew 7.4 per cent last year, robust by global standards but still the slowest in 24 years.
With deflationary pressures mounting after a tumble in commodity prices, Mr Li said China would also lower its inflation target for this year to around 3 per cent from 3.5 per cent last year.