Daily Times

Premier Li Keqiang told the opening session of China’s annual National People’s Congress that the government is targeting growth of 6.0-6.5 percent this year for the world’s second-largest economy, lowering its range from 2018.

“We must be fully prepared for a tough struggle,” he said.

The government had set a target of around 6.5 percent in 2018 and eventually recorded official growth of 6.6 percent — the slowest pace in nearly three decades. Three-quarters of provinces have already lowered their annual growth targets this year.

– Taxes cut, spending boosted –

“We have made a moderate adjustment to our projection on the basis of a thorough assessment of destabilising factors and uncertainties affecting the economic performance,” Li said.

To combat slowing growth, policymakers have said they will lower taxes, reduce fees and streamline red tape.

China will cut company taxes and employer social insurance contributions paid on behalf of workers by nearly 2 trillion yuan ($298 billion), Li said.

“They need to strike a balance between boosting economic activity and not restarting another debt-fuelled boom,” said Tai Hui of JP Morgan Asset Management.

Fiscal policy will be “proactive”, while monetary policy will remain “prudent”, Li said, outlining cuts to the reserve ratios at medium and small banks to unleash more funds into the economy.

Beijing is determined to achieve above six percent growth for the next two years to “meet its promise” of doubling GDP for the decade ending 2020, said Lu Ting, an analyst at Nomura bank.

– Economic difficulties –

Despite the slowdown, the government unveiled a military budget increase of 7.5 percent to 1.2 trillion yuan, though that is lower than last year’s 8.1 percent hike.

China has spent billions on stealth warplanes, aircraft carriers and other advanced weaponry as it faces territorial disputes in the South China Sea and issues warnings against independence in Taiwan.

Recent economic data point to the difficulties China faces, with growth in the last three months of 2018 clocking in at 6.4 percent.

But the country’s stock market soared to its highest point in more than eight months Monday on renewed optimism about a US trade deal.

Relations with the United States deteriorated sharply last year after President Donald Trump hit roughly half of Chinese imports with new tariffs in an attempt to force trade concessions.

Trump, however, has voiced confidence that he could soon sign a deal with Xi.

Li said China will settle “trade disputes through discussions as equals”.

“Right now both teams are still negotiating because there is still lots left to do,” Commerce Minister Zhong Shan told reporters, adding there have been “breakthroughs in some areas”.

The legislature will next week pass a new law regulating foreign investment and barring the forced transfer of technology by foreign firms to Chinese joint venture partners, in a move that could help ease US trade tensions.

Beijing will “create a fair and impartial market environment where Chinese and foreign companies are treated as equals and engage in fair competition”, Li said.

The European Union Chamber of Commerce in China, which has voiced concerns that the foreign investment law was being fast-tracked, cautiously welcomed the government report.

“We hope that the work report provides real impetus to create a fair and well-regulated Chinese market with global characteristics,” said Mats Harborn, president of the European Union Chamber of Commerce in China.