China sent its strongest signal yet that its days of chasing breakneck economic growth are over, promising to wage a “war” on pollution and reduce the pace of investment to the slowest in a decade as it pursues more sustainable expansion.
In a State of the Union-style address to an annual parliament meeting that began yesterday, Chinese Premier Li Keqiang (李克強) said China aimed to expand its economy by 7.5 percent this year, the highest level among the world’s major economies, but stressed that this level of growth would not get in the way of reforms.
In carefully crafted language that suggested Beijing had thought hard about leaving the forecast unchanged from last year, Li said the world’s second-largest economy will pursue reforms stretching from the environment to the financial sector, even as it generates sufficient growth to support incomes and employment.
After 30 years of red-hot double-digit percentage growth that has lifted millions out of poverty, but also polluted the country’s air and water and saddled the country with ominous debt levels, China is trying to change tack and rebalance its economy.
“Reform is the top priority for the government,” Li told about 3,000 hand-picked delegates in his first parliamentary address in a cavernous meeting hall in central Beijing.
“We must have the mettle to fight on and break mental shackles to deepen reforms on all fronts,” he said.
Idle factories will be shut, private investment will be encouraged, and work on a new environmental protection tax will be speeded up to create a greener and more balanced economy powered by consumption rather than investment, Li said.
To aid the transformation, the National Development and Reform Commission told parliament that the government will target 17.5 percent growth in fixed-asset investment this year, the slowest in 12 years.
Investment is the largest driver of China’s economy and accounted for over half of last year’s 7.7 percent growth by expanding 19.6 percent, exceeding an 18 percent target.
Some analysts welcomed the plans for steady economic growth as a sign that the giant Chinese growth engine will stay on an even keel despite its wobbly start for the year, but other analysts worried that the government’s refusal to tolerate slower economic growth was a sign Beijing may not be as bold in its reforms as some had hoped.
Li, China’s first premier with an economics doctorate, said the government would maintain an inflation target of around 3.5 percent for this year, increase broad M2 money supply by 13 percent and keep fiscal deficit at 2.1 percent of GDP. All were widely expected.
He repeated the government’s standard rhetoric on financial reforms, saying that authorities’ grip on the yuan will be gradually relaxed and deposits eventually insured, but did not provide a time line.
On the environment, however, Li did not mince his words.
“Smog is affecting large parts of China and environmental pollution has become a major problem, which is nature’s red-light warning against the model of inefficient and blind development,” he said in an address that lasted a little over 100 minutes, which state media said was the shortest ever.
“Fostering a sound ecological environment is vital for people’s lives and the future of our nation,” he said.
China will fight smog with the same determination it battled poverty and all society should “act more vigorously to protect the land our lives depend upon,” Li said.