China cuts its economic growth target to 6.5-7 percent

[rooster59]

China cuts its economic growth target to 6.5-7 percent

JOE McDONALD, The Associated Press
LOUISE WATT, The Associated Press


BEIJING (AP) — China's leadership cut this year's growth target for its slowing economy to 6.5-7 percent and promised Saturday to open its oil and telecoms industries to private competitors as part of sweeping reforms aimed at boosting productivity and incomes.

The growth target, down from last year's "about 7 percent" and less than half of 2007's peak of 14.2 percent, was included in a work report delivered by Premier Li Keqiang to China's national legislature in front of nearly 3,000 delegates gathered in the cavernous Great Hall of the People.

Li, the top economic official, promised to press ahead with market-oriented reforms that will include opening the telecoms, petroleum and public utilities industries, though he failed to say whether foreign companies might be allowed in. He said private companies would receive the same treatment as state-owned enterprises in project approval, finance and tax policy.

"We must deepen reform across the board," the premier said in a nationally televised speech. He said the market "must play a decisive role."

The world's second-largest economy has cooled steadily over the past five years as the ruling Communist Party tries to replace a worn-out model based on trade and investment with self-sustaining growth driven by domestic consumption. Growth in 2015 declined to a 25-year low of 6.9 percent and is forecast to drift lower this year.

Plans call for transforming China into a middle-income economy with self-sustaining growth driven by consumer spending instead of investment, trade and heavy industry. That requires the ruling party to cut the dominance of state companies that dominate industries from banking and telecoms to oil and steel and give entrepreneurs a bigger role.

Li promised to open service and manufacturing industries wider to foreign investors, though he gave no details. He promised regulations would be made "more fair, transparent and predictable" to attract investment. Business groups have complained Chinese regulators are hampering access to promising sectors in violation of its free-trading pledges.

Much of China's slowdown has been self-imposed as regulators clamped down on a building boom and nurtured retailing, tourism and other service industries. An unexpectedly sharp downturn over the past two years has raised the risk of politically dangerous job losses and prompted Beijing to shore up growth with mini-stimulus efforts.

Li also said China needs to fix its environmental problems, although he laid out few specifics, and promised more investment in science and research and development to lead the way to more advanced manufacturing and innovative technology.

The latest growth target would be the minimum Chinese leaders have said is required to achieve the official goal of doubling incomes per person from 2010 levels by 2020. Economists warn anything higher could set back reforms by forcing Beijing to prop up growth with more wasteful investment.

Communist leaders have tried in recent years to shift public attention away from the growth target. They say their priority is jobs and so long as the economy generates enough they will accept slower growth.

The slowdown and Beijing's reforms have wiped out jobs in mining, steelmaking and other industries.

Retailing, e-commerce and other service industries are growing and absorbing some idled workers but others are struggling to find work. The government says the economy created 13 million new jobs last year but has not said how many were lost at the same time.

The country needs to create more than 50 million new urban jobs during the five years through 2020, Li said.

The premier pledged to accelerate "supply-side reform," or the painful process of shrinking bloated industries from steel to cement to aluminum in which supply exceeds demand.

That glut has led to price-cutting wars that are driving companies into bankruptcy. Steel producers have responded by exporting their surplus, prompting complaints by China's trading partners.

Li said Beijing will promote mergers and shut down "zombie enterprises" — the Chinese term for companies that are kept afloat by cheap loans from state banks. The premier said targets will include the coal and steel industries, for which plans already were announced in February, but didn't give details of other sectors that will be affected.

The government said this week it expects to eliminate 1.8 million coal mining jobs — about 17 percent of the industry's workforce.

Even that sharp reduction is too small to bring coal supply in line with slack demand, according to JP Morgan analysts. They said that is likely to cause coal prices to plummet another 10 percent this year, worsening the struggle for financial strapped miners.

Li warned that China will "more and tougher challenges" this year including weak export demand.

Manufacturing weakened in February and trade figures due out Tuesday are expected to show a contraction in exports accelerated, with shipments of Chinese goods falling by up to 20 percent from a year ago.

The latest government plan comes as Chinese leaders struggle to reassure their public and foreign investors growth is on track and they are in control following currency and stock market turmoil.

Widespread expectations, despite repeated official denials, that Beijing will weaken its yuan to boost sagging exports has driven an outflow of capital that spiked to a record $135 billion December.

This week, Moody's Investors Service cut its outlook on China's credit rating from stable to negative. The agency cited rising debt, capital outflows and "uncertainty about the authorities' capacity to implement reforms."

In a reflection of official sensitivity, a Chinese deputy finance minister on Friday retorted that Western models don't apply to China.

"This approach is shortsighted," said the official, Zhu Guangyao, according to the government's Xinhua News Agency. "Practice will prove their decision to lower China's credit rating was wrong."

-- (c) Associated Press 2016-03-05

[lannarebirth]

Translation: China cuts growth target to 3.5% - 4%.

[gyrosman]

So, they placing more chains on the factory doors to produce productively. Will the prices drop at Wal-Marts?

[elgordo38]

Translation: China cuts growth target to 3.5% - 4%.

Yes I have heard 3 to 4% as well. Its so sad that this country can fudge figures and investors have no protection against their own stupidity when they pile in to invest. The Communist government there can make figures up to suit their own model. Where is the so called investment overseer that surely exists in today's modern world.

[Srikcir]

the ruling Communist Party tries to replace a worn-out model based on trade and investment with self-sustaining growth driven by domestic consumption.

Beijing should invite the Sustenance Master Prayut to explain how Thailand's economy has been so successful (at least in Prayut's mind)

Might be a good time for China to STOP making further loans to and investments in Thailand and keep its capital at home.

That might be an economic stab in the back for Prayut but what are trade partners for?

[Publicus]

It's old news that no one believes the data out of Beijing. This had become kind of official back in 2007 when the current PM Li Kejiang was boss of a booming coastal province and told the US ambassador in fluent English the numbers coming out were "man made."

The new news is that actual growth last year was 4% at best, max. Some say 2.5% so it's a good bet to keep both figures in mind.

On reason the whole thing is amusing is that the DGP growth data of recent years is so tightly and neatly clustered. Yes it's not a market economy but...

2012 = 7.8%

2013 = 7.7%

2014 = 7.3%

2015 = "Around" 7.0 - 6.9%

2016 = "Around" 6.5-7%

"Around?" Suddenly there is in the tidy and neat string of GDP growth data a glaring imprecision.

Also amusing is that CCP Boyz in Beijing always have their annual GDP data in hand and ready for release in mid-January. USA and other multi-trillion Westen economies don't get GDP data complied and released till spring. Another neat trick in Beijing, home of the world's fastest abacus.

Most important about 2015 is that is wuz the year of multiple crashes and shocks in the CCP economy, The myth is shattered that competent and capabible leaders were in charge of the show, and that CCP economy wuz sound and a good investment.

The yuan is being shorted by Soros and other currency vultures. Capital flight last year of $1 Trillion and falling exports are putting pressures on the RMB/yuan. Xi Jinping is convinced Soros and US corporations have decided to bring down the CCP economy so Xi is livid.

CCP forex reserves are down from $3.9 Trillion early last year to $3.1 Trillion due to propping up the yuan at a montly average of $100 billion since last June.

There are however two tried and true solutions. One is to free float the yuan which would mean CCP would have to close up China Inc and retire to some nice islands. The second option is to impose strict capital controls, which would mean CCP would have to close up China Inc and....etc etc. Lose-lose politically politically.

CCP says tough times ahead over the next five year plan. Others say tuff times ahead the next 10 years. Still others say the next 15 years.

Daiwa Securities looked last year at CCP capital outflows and domestic capital markets and found one startling trend: 20% off GDP by 2020. That is, 2015 GDP minus 20%.by 2020.

That's a real number.