China needs to sustain economic growth of 7.2 percent to ensure a stable job market, Chinese Premier Li Keqiang (李克強) said as he warned the government against further expanding already loose money policies.
In one of the few occasions when a top official has enunciated the minimum level of growth needed for employment, Li said calculations show China’s economy must grow 7.2 percent annually to create 10 million jobs a year.
That would cap the urban unemployment rate at around 4 percent, he said.
“We want to stabilize economic growth because we need to guarantee employment essentially,” Li said in the Workers’ Daily on Monday. His remarks were made at a union meeting two weeks ago, but were only published in full this week.
Yet even as authorities keep an eye on growth, Li sounded a warning on easy credit supply, which he said had exceeded 100 trillion yuan (US$16.4 trillion) in the world’s second-biggest economy.
“Our outstanding M2 money supply has at the end of March exceeded 100 trillion yuan, and that is already twice the size of our gross domestic product,” Li was quoting as saying. “In other words, there is already a lot of money in the ‘pool,’ to print more money may lead to inflation.”
His comments affirmed the government’s hawkish stance on inflation, and did not signal any changes in policy bias, UBS economist Tao Wang (汪濤) said.
However, the comments underscore the fine line China must toe to create economic growth and jobs for social stability, while guarding against excesses that may hurt its fortunes in the long run.
A crucial meeting of top leaders from Saturday this week to Nov. 12 will shed light on just how committed Beijing is to enforcing reforms, many of which analysts say would test politicians’ will to push through unpopular changes.
Li reiterated that a 7.5 percent growth target for this year remains intact, but noted that weak exports were a risk.
Exports can directly create about 30 million jobs and add another 70 million jobs in other related industries, Li said.
For every percentage point that China generates in economic growth, it creates 1.3 million to 1.5 million jobs, Li said, adding that the export sector can directly or indirectly employ up to 100 million people.
“We are not seeking high-speed growth, and definitely not seeking only GDP growth. But a reasonable speed in growth is needed, and so we have ensured a reasonable range in economic expansion,” he said.
Li did not say that 7.2 percent in annual economic growth was the minimum the government would tolerate, but analysts have always believed that China’s leaders considered growth between 7 percent and 7.5 percent to be reasonable.
Meanwhile, Chinese leaders have ordered local officials to stop expanding industries such as steel and cement in which supply outstrips demand, a Cabinet statement said yesterday, in a sign previous orders to cut overcapacity were ignored.
In a video conference on Monday, planning officials warned local leaders to stop ignoring orders to reduce overcapacity in industries including steel, cement, aluminum and glass.
“Those who still violate discipline will be heavily punished,” said Hu Zucai (胡祖才), the deputy director of the Cabinet planning agency, the National Development and Reform Commission, according to the government newspaper China Daily.
China’s solar panel manufacturers have been especially hard-hit by excess production capacity and price-cutting. In other industries, large amounts of production capacity are idle, the Cabinet statement said.
Cement manufacturers use only 71.9 percent of their capacity as of the end of last year, according to the statement. The steel industry used 72 percent while the rate for glass manufacturers was 73.1 percent.