Wen Jiabao: China targets 7.5% GDP growth, 4% inflation5 March, 2012, 14:18. Posted by Zarathustra
Tags: Economy, Two meetings, Wen Jiaboa
China’s Premier Wen Jiabao made that annual huge speech of the “Report on the work of government” (the State of the Union equivalent) earlier today. As always, China likes to make targets. Last year, in the same big speech, he targeted GDP growth of 8% for the year of 2011, which was surpassed, and inflation of 4%, which failed.
This year, China will target GDP growth of 7.5% (real term), unemployment of 4.6% or below, consumer prices inflation around 4%, exports and imports growth of around 10%. In terms of fiscal policy, central government’s deficit target is RMB550 billion, and central government will issue RMB250 billion bonds on behalf of local governments. Do note that, however, last year he made it clear that while the growth target was 8% for 2011, the growth target for the remaining years of the 12th five-year-plan period would be 7% per annum (real term). So the 7.5% growth he targets now is by no means surprising and not at all slow.
On the whole, the report seems to contain very little that are really surprising.
On the lower GDP growth target, Wen said:
Here I wish to stress that in setting a slightly lower GDP growth rate, we hope to make it fit with targets in the Twelfth Five-Year Plan, and to guide people in all sectors to focus their work on accelerating the transformation of the pattern of economic development and making economic development more sustainable and efficient, so as to achieve higher-level, higher-quality development over a longer period of time. In projecting a CPI increase of around 4%, we have taken into account imported inflation, rising costs of factors of production, and people’s ability to absorb the impact of price increases, while leaving room for the effect of price reforms.
On fiscal policy:
We will increase spending on areas which are important to the people’s wellbeing, such as education, culture, medical and health care, employment, social security, and low-income housing projects. We will pay greater attention to strengthening weak links, and increase funding for agriculture, rural areas, farmers, underdeveloped areas, scientific and technological innovation, energy conservation, environmental protection, water conservancy, and geological prospecting. We will be more economical; strictly restrict spending on official overseas trips, vehicles for official use, and official hospitality; greatly reduce meetings and documents; deepen reform of the system for the use of official cars; and further reduce administrative costs. We will continue to restrict the construction of office buildings in terms of both size and grades, and reduce spending on building large gymnasiums and stadiums. We will also comprehensively strengthen auditing of key areas, sectors, and funds. We will introduce structural tax reductions. We 10 will fully implement and improve all preferential tax policies to support the development of small, micro and individually owned businesses, and carry out pilot projects to replace business tax with VAT. We will continue to investigate the collection and use of administrative fees and operations of government-managed funds, merge them where necessary, and ensure fees are collected and government-managed funds are operated in a standardized way.
In particular, on the local government debts problem (which we have been following):
We will strengthen supervision of local government debt and guard against risks. We will continue to deal with outstanding debts properly by classifying them into different categories and managing them accordingly, dealing with different situations differently, and resolving problems gradually. We will further investigate and standardize financing companies run by local governments. Governments at all levels are prohibited from making guarantees and promises in this respect in violation of laws and regulations. At the same time, we will both take short-term measures and build permanent systems, strictly limit new local government debt, and place revenue and expenditures of local government debt under budgetary management on the basis of their type.
On monetary policy, M2 growth is projected to be at 14%. Besides the target (or hope) of adjusting money credit to meet this target growth, the exchange rate of RMB will be made more flexible.
Consistent with the big theme of encourage consumption and to reduce the reliance on investment (which has been mentioned for ever and ever), Wen said:
We will work hard to expand consumer demand. We will move faster to set up a permanent mechanism for boosting consumption. We will vigorously adjust income distribution, increase the incomes of low- and middle-income groups, and enhance people’s ability to consume. We will improve policies that encourage consumption. We will vigorously develop elderly care, domestic, property management, medical and healthcare services. We will encourage consumer spending on cultural activities, tourism, and fitness; and implement the system of paid vacations. We will actively develop new forms of consumption such as online shopping; support and guide the consumption of green goods such as environmentally friendly building materials, water-saving sanitation products, and energy-efficient vehicles; and expand consumer credit. We will improve the urban-rural logistics system and infrastructural facilities, such as roads and parking lots, strengthen supervision over product quality and safety, improve the consumption environment, and safeguard consumers’ legitimate rights and interests.
We will continue to improve the investment structure. We will maintain the steady growth of investment and use investment to promote consumption and vice versa. We will fully implement the State Council’s 36 new guidelines on encouraging and guiding nongovernmental investment and adopt specific operating rules for their implementation. We will strengthen the role of government investment in guiding adjustment of the economic structure, ensure funding for key projects that are under construction or expansion, and begin construction on major national projects in an orderly manner. We will tighten standards on market access and the screening and approval process relating to land, credit, energy conservation, environmental protection, safety, and quality; and strengthen supervision and inspections of major projects, particularly those undertaken by governments and state-owned firms, to improve the quality of and returns on such
On the real estate market, Wen said that the “Regulation of the real estate market is in a crucial stage”. To continue regulating the real estate market, the government plans to complete more housing for low-income people:
We will continue to regulate the real estate market and develop low-income housing. We will strictly implement and gradually improve policies and measures for discouraging speculative or investment-driven housing demand, build on progress made in regulating the real estate market, and bring property prices down to a reasonable level. We will continue to develop low-income housing, and basically complete five million units and start construction on over seven million units, ensuring they are built to a high standard. We will work speedily to improve the system for constructing, allocating, managing, and recalling low-income housing units. We will take effective measures to increase supply of regular commodity housing. We will accelerate development of an urban housing information system and reform the real estate tax system to promote long-term, steady, and sound growth of the real estate market.