China would aim to achieve “a good start” in the first quarter for the economy, the state planner said yesterday, signaling that authorities could roll out more stimulus measures in the near term to counter slowing growth.
China would strengthen monitoring of its economic situation and improve its “reserve” of economic policies, the Chinese National Development and Reform Commission (NDRC) said in a statement.
The world’s second-biggest economy slowed last year as Chinese authorities carried out long-term structural adjustments to transition to a more gradual, but sustainable growth trajectory.
A trade spat with the US has also heaped uncertainty on China’s near-term outlook. Exports last month unexpectedly fell the most in two years in a sign of mounting pressure on the economy.
Chinese Premier Li Keqiang (習近平) said that China achieved last year’s key economic targets, which were “hard-won,” and seeks a strong start to the economy in the first quarter to establish conditions helpful to meeting this year’s goals, according to state television on Monday.
Sources last week told reporters that Beijing was planning to lower its growth target to 6 to 6.5 percent this year after an expected 6.6 percent last year, the slowest pace in 28 years.
The proposed target, to be unveiled at an annual parliamentary session in March, was endorsed by top leaders at the annual closed-door Central Economic Work Conference in the middle of last month, the sources said.
Annual growth of about 6.2 percent is needed this year and next year to meet the Chinese Communist Party’s long-standing goal of doubling GDP and incomes in the decade to next year, and to turn China into a “modestly prosperous” nation.
China has lowered the level of reserves that commercial banks need to set aside for the fifth time in a year, to spur lending, particularly to small and medium-sized firms.
Beijing has also cut taxes and fees, and stepped up infrastructure investment to shore up the economy.
This year, China is to step up fiscal expenditure and implement larger tax and fee cuts.
The cuts would focus on reducing burdens for small firms and manufacturers, the Chinese Ministry of Finance said in a statement yesterday.
Stabilizing employment is the government’s top priority, NDRC Vice Chairman Lian Weiliang (連維良) told a news conference yesterday.
China would speed up investment projects and local government bond issuances, but would not resort to “flood-like” stimulus, Lian said.
The central bank, in a separate statement, said it would maintain prudent monetary policy, keeping it neither too tight nor too loose, and strengthen the counter-cyclical adjustments.
Monetary policy would be made more forward-looking, flexible and targeted, the People’s Bank of China (PBOC) said.
A prudent monetary policy does not mean that there would be no changes, PBOC Deputy Governor Zhu Hexin (朱鶴新) told the news conference.
When asked if the PBOC should cut benchmark interest rates, Zhu said existing monetary policy measures should be improved.
A few analysts believe interest rate cuts are a possibility, but most expect that Beijing will refrain from massive stimulus measures like those deployed in the past, due to worries that it could add to a mountain of debt and weaken the yuan.
“Both fiscal and monetary policy have been loosened over the past few months and this should start to feed through to the real economy by the second half of this year,” analysts at Capital Economics said in a note.
“However, the scale of the stimulus so far has been more limited than in 2015-16, and the effect on activity is likely to be correspondingly smaller,” they said.
Chinese banks extended 16.17 trillion yuan (US$2.4 trillion) in net new yuan loans last year, the PBOC said in its statement, blowing past the previous record of 13.53 trillion yuan in 2017.
Outstanding yuan loans were up 13.5 percent at the end of last year from a year earlier, according to the central bank.
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