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Wednesday, March 07, 2018, 23:23
Premier Li keeps quality growth in focus
By Evelyn Yu
Wednesday, March 07, 2018, 23:23 By Evelyn Yu

Premier Li Keqiang delivers the Government Work Report at the opening meeting of the first session of the 13th National People's Congress at the Great Hall of the People in Beijing on March 5, 2018. (XU JINGXING / CHINA DAILY)

A softer tone on economic expansion but firmer hand on risk control show the National People’s Congress will keep its focus on improving the quality of growth. 

In his Government Work Report for this year, delivered to the NPC on Monday, Premier Li Keqiang kept the GDP growth target for this year at 6.5 percent but he omitted a phrase he had used last year – “strive to achieve higher”.

For the first time the government set a 5.5 percent target for the survey unemployment rate, widely considered more accurate and comprehensive than the registered unemployment rate as the survey rate includes migrant workers. 

This target raises the likelihood that, over time, the central government may increasingly focus on employment-related targets, and less on headline GDP targets, UBS said in a report.

READ MORE: China on track for 'high-quality development' in 2018

Five years ago the country decided to double 2010 GDP and per-capita income by 2020. Achieving that demands year on year growth of 6.3 percent in 2018-2020, a target widely deemed achievable.

But even that doubling target was not mentioned at the 19th National Congress of the Communist Party of China last year.

“You can see government’s pledge to shift the country from high-speed growth to quality growth has been very consistent,” said Hu Yifan, chief China economist at UBS.

The cooling down in the property market and ongoing efforts to deleverage shadow banking and tighten controls on local-government debt would slow down the economy, Hu said.

The tax-cut initiative and poverty alleviation efforts should support corporate capital expenditure and household consumption. UBS estimated GDP would grow 6.6 percent this year, a slight slowdown from last year’s 6.9 percent. 

Li announced corporate and personal income-tax cuts amounting to 800 billion yuan for this year ($126 billion).

The country’s personal income tax threshold currently stands at 3,500 yuan per month; the market widely speculates that the threshold might be lifted to between 5,000 and 10,000 yuan.

Despite the tax reduction the government is tightening fiscal policy, UBS said.

The government’s general budget deficit target has been lowered from 3 percent of GDP last year to 2.6 percent, or 2.38 trillion yuan, this year.

The planned quota for special local-government bonds increased significantly from by 800 billion yuan to 1.35 trillion yuan this year.

The new special bond, introduced by the Finance Ministry last year, is limited to just two types of government project – land and roads – which typically provide steady and strong cash flow to local authorities.

Unlike typical local government bonds, special bonds are repaid by returns from investment projects instead of the local government’s general revenue.

ALSO READ: How to achieve high-quality growth

The report said the expanded quota is primarily to support existing projects.

“The fact that the special bonds are primarily for existing projects rather than new projects show that central government does not wish to see local governments aggressively expand infrastructure investment that would increase their debt burden,” Hu reflected.

“After the epidemic of illegal financing problems among public-private partnership projects in 2016 and last year was exposed, the central government would also like to fend off risks that local authorities will hide debt in PPP projects and make the debt explicit through a more transparent quota system, the move would help local government be more responsible in their spending," she said.


evelyn@chinadailyhk.com


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