BEIJING – A year after China was hit by the coronavirus, the government on Friday promised a robust return to economic growth of “over 6 percent,” a signal that China is ready to do whatever it takes to keep the world’s second largest economy going strong.
The commitment is a positive sign for the global economy. It suggests that Beijing is ready to free up money to keep the economy going rather than slowing down to cope with the ever-increasing debt. That means the Chinese economy will continue to buy much of what the world makes, including iron ore and computer chips.
China’s growth target is for the virus to have all but stopped within its borders and for the number of cases in countries like the US and India to have fallen sharply in recent weeks.
China’s goal for this year could easily be achieved. It is well below what many Western economists expect from the Chinese economy. They forecast around 8 percent growth as industrial goods exports continue to boom while the services sector recovers from a very poor performance last year.
China’s Prime Minister Li Keqiang announced the target when he presented a report on the work of the government to the legislature, the National People’s Congress, at the beginning of its weeklong annual meeting.
“As the coronavirus continues to spread around the world, instability and uncertainty in the international landscape increase and the global economy continues to face major challenges,” Li said.
“Domestically, there are still weak links in our work to control Covid-19,” he added. “The foundation for our country’s economic recovery needs to be further consolidated, the barriers to consumer spending remain and investment growth is unsustainable.”
The forecast shows that China expects a remarkable rebound after last year when the government abandoned setting an annual growth target for the first time in decades due to the uncertainties of the pandemic. Ultimately, China posted 2.3 percent growth in 2020, much slower than its usual 6 percent or more pace in recent years, but by far the best performance of any major economy.
However, China’s growth last year was even more unbalanced than usual. The country was actually losing ground in its goal of moving away from its reliance on exports and debt-driven infrastructure investments and relying more sustainably on domestic consumption. As in most countries during the pandemic, travel and leisure spending in China fell over the past year.
Mr. Li promised on Friday that he would intensify efforts to increase consumption. “By focusing on improving people’s wellbeing, we will increase demand and promote better matching between consumption and investment,” he said.
He promised to cut taxes on the smallest businesses, many of which are tiny businesses in towns and villages. However, infrastructure spending will continue very quickly. Mr. Li only announced a token cut – 2.7 percent – on the issue of special purpose bonds this year, which are mainly used to finance infrastructure projects and have almost tripled in the last two years.
While China has sought to stabilize ties with the United States, Mr. Li signaled that Beijing is taking a tougher line on Hong Kong and Taiwan – two potential hot spots with Washington.
“We will resolutely protect ourselves against and deter external interference in Hong Kong affairs,” said Li.
Congress stands ready to deepen China’s crackdown on Hong Kong, building on a national security law Beijing imposed on the city last year. This year delegates will approve a proposal that would drastically reduce democratic competition in local elections in the former British colony.
The Chinese government has also taken an increasingly tough line on Taiwan – the democratically ruled island that Beijing claims as its territory – and Mr. Li’s language appeared to be harsher than in previous labor reports. Taiwan’s current president, Tsai Ing-wen, has resisted Beijing’s demands to accept the mainland’s definition of island status.
“We will continue to be very vigilant and resolutely deter any separatist activity that seeks Taiwan independence,” said Li.
