BY Fraser Tennant
A 2016 growth target of between 6.5 and 7 percent and a major reduction in unemployment are the main aims of China’s new Five-Year Plan – the achievement of which the government hopes will help address the country’s deepening economic problems.
Unveiled by prime minister Li Keqiang during the opening of China's 12-day annual national parliament on 5 March, the Five-Year Plan (the country’s thirteenth) is essentially a roadmap for the nation’s development from 2016 to 2020 and will be a “tough battle” to achieve, said Mr Keqiang, requiring China to face “more and greater difficulties".
Further key components of the Plan include the requirement for China to cap its energy consumption (for the first time ever), tackle rising inflation, and introduce an effective job creation programme. However, when announcing the Plan at the opening session of the legislature, the prime minister was noticeably less forthcoming with details of how the targets contained in the Five-Year-Plan will actually be met.
Also in the Chinese government’s sights is the restructuring of inefficient industries, in particular dealing with zombie companies (known as Jiangshi in China) – organisations that are unable to pay their bills and are reliant on government assistance to meet their financial obligations.
Perhaps inevitably, there has been much criticism of the Plan from many quarters with economists and investors raising concerns that the fiscal target outlined (a fiscal deficit equivalent to 3 percent of GDP) is not ‘aggressive’ enough. Critics have also said that the national growth target itself may cause problems, as under pressure central government officials may be tempted to obscure or even falsify data.
In response, Xu Shaoshi, head of the National Development and Reform Commission (NDRC), said that the government wanted to improve the efficiency of its investments with a strategy of more targeted spending being adopted. "China will absolutely not experience a hard landing," said Mr Shaoshi at the opening of parliament. “These predictions of a hard landing are destined to come to nothing."
With China being the only major world economy (the second biggest) to announce an annual growth target, the pressure is now on the Chinese government to deliver its extensive economic reform programme to guarantee sustainable growth.