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China sets lowest GDP growth target in more 30 years

China sets lowest GDP growth target in more 30 years

China’s government has set its lowest economic growth target in more than three decades for 2022, reflecting how stringent Covid-19 controls and increased global risks will continue to hamper demand from both businesses and consumers.

Beijing will target GDP growth of around 5.5% this year, Premier Li Keqiang said at the opening of the National People’s Congress.

Bloomberg said that “policymakers were aiming to narrow the budget deficit to around 2.8% of GDP this year from last year’s target of around 3.2%. They’re also aiming to add more than 11 million urban jobs in 2022, keeping the surveyed urban unemployment rate under 5.5% and inflation at around 3%”.

It added that the economy began weakening in the latter part of last year, weighed down by a housing market slump, repeated Covid-19 outbreaks and weak consumer spending. The outlook has deteriorated this year with a spike in geopolitical tensions as Russia’s invasion of Ukraine has hit financial markets and pushed up commodity prices.

“Our country will encounter many more risks and challenges, and we must keep pushing to overcome them,” Li said in the annual government work report. “There is no doubt but that China’s economy will withstand any downward pressure and continue growing steadily long into the future.”

Other highlights of the government report:

  • A total of 3.65 trillion yuan ($578 billion) in special local government bonds will be sold this year, the same as last year.
  • Vows to “step up implementation of the prudent monetary policy”.
  • Pledges to stabilize land and property prices.
  • Reiterates intention to keep the yuan stable.
  • Government to set up a fund to ensure financial stability.

Officials have highlighted economic stability as a top priority this year and urged faster spending from local governments to bolster the economy.

The central bank has already cut interest rates this year and vowed to keep policy flexible and responsive to changing economic conditions. Banks in several cities have also been easing mortgage rates.

The government hasn’t set a GDP target under 6% since 1991. No target was set in 2020, when the pandemic caused growth to slow to 2.2%. The economy expanded 8.1% last year.

 

Record tax refunds

China’s tax refunds and cuts will reach a record high this year in an effort to relieve the burden on market entities, Minister of Finance Liu Kun told the National People’s Congress.

A government report submitted to the national legislature said the total volume of tax refunds and cuts will total around 2.5 trillion yuan ($395 billion) in 2022.

The policy will be targeted, with 1 trillion yuan going to six sectors including manufacturing, with another 1 trillion yuan for micro and small enterprises and self-employed individuals, Liu said.

Market entities will receive a 1.5 trillion yuan boost to their cash flow in the form of value-added tax credit refunds, he said.

China has cut more than 8.6 trillion yuan in taxes and fees over the past six years.