China is targeting a growth of 6.5 %, debt, and pollution in its viewfinder

AFP

AFP

Monday, march 5, 2018 03:05

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Monday, march 5, 2018 03:05

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China has renewed for 2018 its goal of an economic growth of about 6.5 %”, at a time when Beijing said to aim for a model of sustainable development by strengthening its efforts to combat the debt, the financial risks and the pollution.

“It is a figure well-suited, the economy is in transition from a period of rapid growth and a phase of qualitative development,” said Monday Prime minister Li Keqiang, in a speech-river opening the annual session of the Parliament.

Certainly, the asian giant had already given 2017 as the target for GDP growth of “around 6.5 %”, but in displaying his intention to “do better if possible” — a formula that Mr. Li is well-kept to repeat this year.

The growth has finally accelerated to 6.9 % last year. A growth of 6.5% would mark a strong slowdown, and the worst performance of china in 28 years.

“We’re able (…) to achieve a growth of better quality, more efficient and more sustainable,” said Mr. Li in front of the people’s national Assembly (ANP).

The idea is to always rebalance the economy towards domestic consumption, services and innovation in technology — at the expense of heavy industries in debt and surcapacitaires… and for the price of a loss of momentum in activity.

Significantly, no new target of GDP in the long term had been unveiled in the fall during the congress’s five-year communist Party.

“Risk management”

Without surprise, Li Keqiang stressed Monday on “three decisive battles”: against poverty, against pollution, and especially against the financial risks associated with the colossal public and private debt of the country (over 250% of GDP).

“We will defend the blue of the sky, (…) tightening the norms on the polluting emissions” and to strengthen controls on the rampant pollution of the soil, has hammered the head. Many factories have already had to cease or reduce their activity this winter.

Above all, Beijing intends to “contain and defuse debt risks of local governments” and strengthen the supervision of the financial sector, pinned to its investment products deemed dangerous.

The regime has also attacked the conglomerates are private and are heavily indebted.

Finally, the measures of economic recovery by public spending will be under pressure: China has lowered its target of a budget deficit for the first time since 2012, to 2.6% of GDP against 3 % for the past two years, said Mr Li.

“This is a sign that the government wants to force local authorities to restrain their spending (…) The priority is risk management”, observe the analysts of the bank ANZ.

“Public sector strengthened”

Pinned to both for their debt, their excess production and emissions of pollutants, the heavy industries — coal, steel or cement producers — are particularly targeted.

According to Li Keqiang, China will reduce from 30 million tonnes in 2018 the capacity of its steel producers and 150 million tonnes of its coal production. Beijing had pledged to slash its capacity in the steel of 150 million tonnes between 2016 and 2020… the promise to be materialized as early as this year.

The tightening of the credit and the campaign for pollution control should logically detriment to the economy.

But Mr. Li focused Monday on the “new engines of growth: the electronic, aerospace, internet… firms and the innovation will be supported to blows of tax relief and administrative simplifications, a-t-he assured.

The manufacturing industry will be “completely open” to foreign capital and the opening of the financial sector will continue, he promised, without details.

The plan does not, however, loosen its grip on the economy.

“We will show no hesitation to consolidate and develop the public sector”, has hammered the Prime minister, calling for a fundamental reform of the major groups-state, which dominate entire sectors, to make them “more efficient, more competitive and more profitable.

Virtual president-for-life, Xi Jinping may be able to tolerate a painful economic downturn in return for his agenda of “reforms”.

But his reforms did nothing liberal, “they do not cause excessive interventionism on the part of the State,” warns Julian Evans-Pritchard of Capital Economics.

This is confirmed by the political scientist in hong kong Willy Lam: “Only reforms that will not cause the authority of the Party shall be applied”.