Annual report boosts China and the world economy confidence
By Yao Shujie | chinadaily.com.cn | Updated: 2017-03-06 11:27
On the morning of March 5, 2017, China’s Prime Minister Li Keqiang delivered the government's annual working report to the National People’s Congress in Beijing. The report summarizes China's achievements in the past year and sets new social-economic development targets for the coming year.
Despite the adverse external environment in the aftermath of the world financial crisis and some severe internal structural issues, China’s gross domestic product (GDP) expanded by 6.7 percent in real terms to 74.4 trillion yuan ($10.79 trillion), accounting for 15 percent of the world GDP and 30 percent of its net growth.
Personal disposable income rose 6.3 percent, supported by 13.14 million newly created jobs throughout the country. China’s unemployment rate was reduced to 4.02 percent, the lowest level in recent history. The pollution intensity of GDP per unit was reduced by 5 percent, demonstrating China’s ability to build a sustainable economic development model in the long term.
The consumer price index (CPI) rose by only 2 percent. Industrial profitability changed from minus 2.3 percent in the first half of the year to a positive level of 8.5 percent in the second half, indicating a remarkable improvement in industrial efficiency and boosting the confidence of the Chinese as well as the world economy, despite a volatile global economic environment.
Given what China achieved in 2016 and the potential challenges in the coming year, Li also proposes the following economic and social development targets for 2017. The GDP growth rate will be around 6.5 percent, which is 0.2 percentage points lower than the actual level in 2016. He sets this seemingly cautious target because it will be relatively easy to achieve. A slightly lower growth target will also provide some flexibility for China’s ongoing structural adjustment program, which aims to reduce the production of steel by 50 million tons and the production of coal by 190 million tons. The proposed reduction in steel and coal production is important for China to cut its carbon emissions and to upgrade the country’s industrial technologies.
The CPI growth is set at 3 percent, or 1 percentage point higher than the actual level in 2016. The number of newly employed will be 11 million, which is one million less than the target set in the previous year, but 2.14 million less than the previous actual level of achievement.
As for social development, the new plan particularly specifies different methods to deal with the most pressing issues of housing and house prices. For the smaller cities where house prices are still low and houses are oversupplied, more incentives will be provided to buyers to reduce the housing stock and to encourage rural-urban resettlement. For the first-tier cities where house prices are unusually high, local governments are urged to provide more land for home construction. The urban housing redevelopment program will create six million new homes, and more investments will be made to develop more economic housing to meet the breakneck demand for urban housing of the poor and low income people.
It is proposed that 13 million rural people will become urban residents in 2017. In addition, 10 million rural poor people will be moved out of absolute poverty. Of those, 340,000 people will be relocated from remote areas to the more prosperous localities as part of the country’s campaign to eliminate poverty by 2020.
In 2017, China will invest 0.8 trillion yuan for railway construction and another 1.8 trillion yuan for highway and waterway expansion. This continuing and ambitious investment plan will provide a solid foundation for economic growth to make sure that the growth target can be achieved.
There are other detailed planned targets of China’s social and economic development. All the targets are based on the following three considerations: actual achievement in 2016, the current internal/external economic constraints and the country’s needs for achieving the overall targets of the 13th Five Year Plan during 2016-2020.
To some extent, Li's targets have built in some flexibilities, suggesting that they are not only achievable but also flexible, with some room for overachieving. As a result, this report and the proposed new development plan provide an immense confidence for China and the rest of the world, as based on this plan, China will continue to be the world’s most important economic growth engine in the foreseeable future to come.
Shujie Yao is Chueng Kong Professor of Economics at Chongqing University and the University of Nottingham.