China’s Premier Li Keqiang reiterated the Chinese government’s target for annual GDP growth of 6.5 percent to 7 percent this year, the latest signal that the world’s second-largest economy is slowing down as it shifts its focus to driving domestic consumption rather than pumping out exports.
This is the first time China’s leaders have released the GDP growth target as a range in this way, emphasizing the balance the world’s second-largest economy is attempting to strike between pushing continued growth and avoiding unrealistic expectations at a challenging time. The country saw GDP growth of 6.9 percent in 2015, its lowest rate of growth in 25 years.
“I think seeing a downward revision of China’s GDP targets is expected given the difficult transition that China’s economy is having as it goes through the process of reform. The revision reflects the fact that while China’s consumer economy remains strong that industrial production is still weak and that global demand for products coming out of China has not risen enough to balance overproduction,” said Benjamin Cavender, principal at China Market Research Group.
Chinese stock markets ended mixed Monday. The Shanghai SSE rose 0.8 percent to end at 2,897, while Hong Kong’s Hang Seng ended nearly flat at 20,160.
The country’s national legislature is currently meeting in Beijing for its annual session to outline China’s economic vision and strategic plan for the next five years. A vote on China’s 13th Five-Year Plan, a blueprint for the country’s economy and social priorities for 2016 to 2020 will be held during this session, which runs until March 16.
“China has laid a solid material foundation and its economy is hugely resilient,” the premier said in his opening address over the weekend. “As long as we work together as one to surmount all difficulties, we will definitely achieve the targets for economic and social development in 2016.”
Also meeting this week in Beijing is the National Committee of the Chinese People’s Political Consultative Conference, China’s top political advisory body.
The concurrent meetings are colloquially known in China as the “two sessions” and are widely seen as important because the annual meetings are when the ruling Communist Party spells out its priorities for the year.
The process of voting for the plan is expected to be straightforward, with little-to-no discussion or debate among the 3,000 NPC delegates, who form a rubber-stamp legislature.
The actual decision-making and agenda setting power in China is concentrated at the top of the Communist Party, with President Xi Jinping, the CPC Central Committee and the senior Politburo Standing Committee.
The broad strokes and major initiatives of the 13th Five-Year Plan were decided at the Fifth Plenum of the 18th CPC Central Committee meeting in Beijing last October.
Building a “moderately prosperous” society by the end of this five-year period in 2020 is the stated goal of the plan, this wording signals a shift in the Chinese government’s focus from breakneck growth to a more stable model.
Basic tenants of the plan include poverty alleviation, with aims to double 2010 GDP and the 2010 per capita income of both urban and rural residents by 2020, the further reform of state-owned enterprises, the acceleration of financial reform and the increased urbanization of China, so that a total of 45 percent of the population will live in cities by 2020 (up from 36 percent in 2014).
The meeting comes at a time when China’s apparel industry is already facing challenges, thanks to a combination of rising wages, weak demand and price pressure.
“Looking at apparel specifically, I think we are probably going to see more and more apparel manufacturers shifting their operations offshore to Vietnam or India, or to factories in inland China,” said Cavender. “Many of these companies are operating on very low margins. Over the long-term, China is still going to have a leading role in apparel manufacturing simply because it has such a strong supply chain and logistics network, but in the near-term a lot of Chinese producers are hurting.”
Lu Ming, an economic professor at Shanghai Jiao Tong University said: “This year’s growth could be stabilized if the government carries a correct expansionary policy that is being seen. This will be good for consumption growth and textile in general.”