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 Speaking at the opening of the country's annual parliamentary
meeting on Thursday, Li announced a growth target of around 7
percent for this year, below the 7.5 percent goal that was narrowly
missed in 2014.
"The downward pressure on China's economy is intensifying," Li told
around 3,000 delegates gathered at the Great Hall of the People to
the west of Beijing's Tiananmen Square.
"Deep-seated problems in the country's economic development are
becoming more obvious. The difficulties we are facing this year
could be bigger than last year."
Outlining the government's policy priorities for 2015 in a Chinese
equivalent of the U.S. State of the Union address, Li said there
would be no let-up in an anti-corruption drive and vowed to fight
pollution, which he called "a blight on people's quality of life and
a trouble that weighs on their hearts".
Stressing the need to put the economy on a more sustainable footing
after three decades of breakneck growth, Li said priorities included
pushing ahead with reforms of the giant state-owned enterprises that
still bestride the economy and liberalizing the banking system and
financial markets.
"In order to defuse problems and risks, avoid falling into the
'middle income trap', and achieve modernization, China must rely on
development, and development requires an appropriate growth rate,"
said Li. "At the same time, China's economic development has entered
a 'new normal'."
The annual full meeting of the largely rubber-stamp National
People's Congress is a colorful event, drawing delegates from all
over China, some in traditional ethnic costumes, to the vast hall, a
monument to 1950s Communist architecture.
Its role is largely to endorse policy decisions already agreed by
the party hierarchy.
FISCAL BOOST
In the short-term, China's top policymakers are grappling to sustain
an economy weighed down by a cooling property market, high debt
levels and excess factory capacity. Over the longer run, they are
seeking to boost consumption to relieve overdependence on export
markets and cut wasteful investment.
Underscoring the challenges faced in striking that balance, the
People's Bank of China cut interest rates at the weekend for the
second time in three months.
Adding a fiscal boost to the central bank's monetary support,
Beijing plans to lift government spending to 17.15 trillion yuan
($2.74 trillion) in 2015, an increase of 10.6 percent on 2014.
That will mean raising the budget deficit to 1.62 trillion yuan, or
around 2.3 percent of GDP, compared with 2.1 percent last year and
the widest since 2009, when Beijing unleashed a stimulus splurge in
response to the financial crisis.
Some of the extra money will be spent on railway and water projects
and modernizing agriculture, although the chairman of the
government's economic planning agency, Xu Shaoshi, said its
investment plans should not be seen as a "massive stimulus".
China's economy grew 7.4 percent last year, robust by global
standards but still the slowest in 24 years.
With deflationary pressures mounting after a tumble in commodity
prices, Li said China would also lower its 2015 inflation target to
around 3 percent from 3.5 percent in 2014.
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MARKET REFORMS, SOCIAL STABILITY
A key plank of China's reform agenda is tackling overcapacity in
polluting heavy industries and moving its factories up the global
value chain.
"Manufacturing is traditionally a strong area for Chinese industry,"
said Li. "We will implement the 'Made in China 2025' strategy,
seek innovation-driven development, apply smart technology,
strengthen foundations, pursue green development and redouble our
efforts to upgrade China from a manufacturer of quantity to one of
quality."
Li promised a greater role for private business in the economy,
which he said would be further opened up by halving the number of
industries in which foreign investment is restricted.
A draft foreign investment catalog issued in November trimmed the
number of sectors where China limits foreign investment to 35 from
79, but foreign business lobbies said that cut fell short of
expectations.
"We look forward to seeing details of the revised catalog and
streamlining measures, and share the premier's hopes for a stable,
fair, transparent and predictable business environment in China,"
James Zimmerman, chairman of the American Chamber of Commerce in
China, said in response to Li’s remarks.
With Communist Party leaders ever mindful of social stability, Li
said China aimed to create more than 10 million new jobs in 2015 and
would ensure the jobless rate does not exceed 4.5 percent. China
targeted a registered urban unemployment rate of 4.6 percent last
year.
The fight against pollution and corruption have contributed to the
slowing economy, as Beijing has clamped down on dirty industries,
and the fear of being caught in the anti-graft net has had a
chilling effect on some business activity.
But in the longer term, the Communist Party leadership regards
tackling the twin side-effects of China's decades-long dash for
growth as vital to maintaining its grip on power.
"Our tough stance on corruption is here to stay," said Li. "Our
tolerance for corruption is zero, and anyone guilty of corruption
will be dealt with seriously."
(Additional reporting by Judy Hua, Kathy Chen, Gerry Shih, Ben
Blanchard, Megha Rajagopalan, Jason Subler and Dominique Patton;
Writing by Alex Richardson; Editing by Will Waterman)
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