In what comes as no surprise, China has abandoned its GDP growth target and will launch a number of stimulus measures to kickstart its economy.
China is still working towards building a “moderately prosperous society” but has set no specific economic growth target for 2020 due to “great uncertainty”.
“Not setting a specific target for economic growth will enable all of us to concentrate on ensuring stability on the six fronts and security in the six areas,” the National People’s Congress said in a report. “We must focus on maintaining security in the six areas in order to ensure stability on the six fronts. By doing so, we will be able to keep the fundamentals of the economy stable.”
China will instead focus on stabilising employment, foreign trade, investment, expectations, and foreign investment; and supply chain stability and food and energy security. China aims to add over 9 million new urban jobs in 2020 and to keep its surveyed unemployment rate at 6 per cent, and will issue ¥3.75 trillion in special government bonds to fund growth.
“Maintaining security will deliver the stability needed to pursue progress, thus laying a solid foundation for accomplishing our goal of building a moderately prosperous society in all respects.”
China rolled out an enormous $586 billion in stimulus spending at the height of the GFC – a package that may have turned the tide of a global recession. But 10 years on, China is reluctant to repeat the stimulus due to the fact that it led to serious misallocation of capital and other negative side effects including serious pollution and high debt.
“Too much debt is seen as a societal risk,” said Ben Powell, chief APAC strategist at BlackRock Investment Institute. “This has resulted in a strong conviction among China’s leaders that austerity is good. It could both strengthen the economy and help in the fight against corruption, pollution, and inequality. This was the mindset that China went into 2020 with.”