China never said that its economy must grow at a rate of 7 percent this year, Chinese Premier Li Keqiang (李克強) said in comments reported by the government ahead of a key meeting this week that will set economic and social targets for the next five years.
Li’s comments coincide with remarks by a top central bank official, who said on Saturday that China would be able to keep annual economic growth at about 6 percent to 7 percent over that period.
The statements come at a time of growing concern in global financial markets over China’s once mighty economic juggernaut.
China cut interest rates for the sixth time in less than a year on Friday. Monetary policy easing in the world’s second-largest economy is at its most aggressive since the 2008-2009 financial crisis, as growth looks set to slip to a 25-year low this year of under 7 percent.
China’s economy grew 6.9 percent in the July-September quarter from a year earlier, data showed last week.
Speaking on Friday at the Central Party School, which trains rising Chinese Communist Party officials, Li said the economic difficulties ahead for China should not be underestimated.
His report to the annual meeting of parliament set this year’s GDP growth target at about 7 percent.
“We have never said that we should defend to the death any goal, but that the economy should operate within a reasonable range,” the central government paraphrased Li as saying in a statement released on its Web site late on Saturday.
Chinese leaders will signal that growth is their priority over reform by setting a growth target of about 7 percent in the next long-term plan, policy insiders said.
The party’s central committee will meet from today to Thursday to set out the 13th five-year plan.
Nevertheless, while the focus is on growth, China is still moving ahead on financial reforms.
Besides cutting interest rates on Friday, the People’s Bank of China said it was also freeing the interest rate market by scrapping a ceiling on deposit rates.
The change, which Beijing had promised to deliver for months, will in theory allow banks to price loans according to their risk, and remove a distortion to the price of credit that analysts say fuels wasteful investment in China.
The deposit rate reform builds on the introduction of deposit insurance, creating space for smaller banks to compete with their bigger rivals.
It is seen as a long-term step toward a more market-driven banking sector, if smaller banks lend funds to parts of the economy shunned by large banks.
China’s economic growth has not been bad over the past year considering the problems in the global economy, Li added.
There were reasons for optimism going forward, such as rising employment, more spending on tourism and a fast growing service sector, Li said.
“The hard work of people up and down the country and the enormous potential of China’s economy gives us more confidence that we can overcome the various difficulties,” he said.
While the government has flagged a “new normal” of slower growth as it tries to shift the economy to sustainable, consumption-led growth, official data shows it has consistently at least met, and mostly exceeded, the growth targets it sets.
Beijing needs average growth of close to 7 percent over the next five years to hit a previously declared goal of doubling gross domestic product and per capita income by 2020 from 2010.
However, the market turmoil and fallout from the modest yuan devaluation have raised fears among policymakers that an abrupt slowdown in growth could spark systemic risks and destabilize the economy.
GEOPOLITICAL ISSUES? The economics ministry said that political factors should not affect supply chains linking global satellite firms and Taiwanese manufacturers Elon Musk’s Space Exploration Technologies Corp (SpaceX) asked Taiwanese suppliers to transfer manufacturing out of Taiwan, leading to some relocating portions of their supply chain, according to sources employed by and close to the equipment makers and corporate documents. A source at a company that is one of the numerous subcontractors that provide components for SpaceX’s Starlink satellite Internet products said that SpaceX asked their manufacturers to produce outside of Taiwan because of geopolitical risks, pushing at least one to move production to Vietnam. A second source who collaborates with Taiwanese satellite component makers in the nation said that suppliers were directly
Top Taiwanese officials yesterday moved to ease concern about the potential fallout of Donald Trump’s return to the White House, making a case that the technology restrictions promised by the former US president against China would outweigh the risks to the island. The prospect of Trump’s victory in this week’s election is a worry for Taipei given the Republican nominee in the past cast doubt over the US commitment to defend it from Beijing. But other policies championed by Trump toward China hold some appeal for Taiwan. National Development Council Minister Paul Liu (劉鏡清) described the proposed technology curbs as potentially having
EXPORT CONTROLS: US lawmakers have grown more concerned that the US Department of Commerce might not be aggressively enforcing its chip restrictions The US on Friday said it imposed a US$500,000 penalty on New York-based GlobalFoundries Inc, the world’s third-largest contract chipmaker, for shipping chips without authorization to an affiliate of blacklisted Chinese chipmaker Semiconductor Manufacturing International Corp (SMIC, 中芯). The US Department of Commerce in a statement said GlobalFoundries sent 74 shipments worth US$17.1 million to SJ Semiconductor Corp (盛合晶微半導體), an affiliate of SMIC, without seeking a license. Both SMIC and SJ Semiconductor were added to the department’s trade restriction Entity List in 2020 over SMIC’s alleged ties to the Chinese military-industrial complex. SMIC has denied wrongdoing. Exports to firms on the list
SPECULATION: The central bank cut the loan-to-value ratio for mortgages on second homes by 10 percent and denied grace periods to prevent a real-estate bubble The central bank’s board members in September agreed to tighten lending terms to induce a soft landing in the housing market, although some raised doubts that they would achieve the intended effect, the meeting’s minutes released yesterday showed. The central bank on Sept. 18 introduced harsher loan restrictions for mortgages across Taiwan in the hope of curbing housing speculation and hoarding that could create a bubble and threaten the financial system’s stability. Toward the aim, it cut the loan-to-value ratio by 10 percent for second and subsequent home mortgages and denied grace periods for first mortgages if applicants already owned other residential