Chinese Vice Premier Li Keqiang (李克強) said the world’s second-largest economy needs to increase domestic consumption and stabilize exports because overseas demand remains weak.
Li, widely expected to succeed Chinese Premier Wen Jiabao (溫家寶) in a leadership transition that begins later this year, promised flexible policies to keep growth brisk and prices stable, with a focus on boosting domestic demand and pursuing structural reforms to make growth more stable and balanced.
“Expanding domestic demand is a strategic point for economic development,” Li told a forum in Beijing yesterday.
Boosting consumption is important “especially this year as there is slack in intentional markets,” he said.
China last month recorded its biggest trade deficit since at least 1989 as Europe’s sovereign-debt crisis eroded demand for the nation’s goods. In 2009, China introduced tax incentives and subsidies to encourage domestic purchases of cars and home appliances in an effort to stem the effects of the global financial crisis. It also froze the yuan’s appreciation to support exporters.
“We hope to expand domestic demand, and we also need to stabilize and expand exports,” Li said, without identifying measures the government might take.
China began allowing the yuan to appreciate in June 2010 after having prevented it from strengthening since July 2008. The Chinese currency has gained about 8 percent since then.
Economic growth in the fourth quarter of last year was the slowest in two years. Last month, China reported a trade deficit of US$31.5 billion. Imports rose 39.6 percent from a year earlier to US$146 billion and exports increased 18.4 percent to US$114.5 billion, according to statistics from the Chinese General Administration of Customs
Wen told a news conference at the end of the National People’s Congress that growth would be made more resilient to external pressures, domestic property and inflation risks deflated, and 10.7 trillion yuan (US$1.7 trillion) in debt racked up by local governments dealt with, while also promoting political change.
He cut China’s official growth target for this year to 7.5 percent, down from the 8 percent targeted in each of the last eight years, aiming to create enough leeway to deliver reform in such areas as subsidies, without igniting inflation.
China would import more than US$1.9 trillion of goods this year, Li said at the forum yesterday.
Domestically, the economy still faces problems of uncoordinated and unsustainable growth, Li said, echoing comments by other officials and the premier.
The government has targeted transforming the economy so that domestic consumption accounts for a greater proportion of growth, and the nation depends less on exports and investment.
Li said China could spend as much as 1 trillion yuan on research and development this year. The country should also tap into its growing urbanization to fuel domestic demand, he said. The number of citizens living in towns and cities exceeded the nation’s rural population for the first time in China’s history last year.
National Development and Reform Commission Chairman Zhang Ping (張平) said at the same forum that investment would continue to be an important force in improving domestic demand.
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