China to target around 6% growth in 2020, step up state
spending: sources
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[December 14, 2019] By
Kevin Yao
BEIJING (Reuters) - China plans to set a
lower economic growth target of around 6% in 2020 from this year's
6-6.5%, relying on increased state infrastructure spending to ward off a
sharper slowdown, policy sources said.
Chinese leaders are trying to support growth to limit job losses that
could affect social stability, but are facing pressure to tackle debt
risks caused by pump-priming policies.
The proposed target, to be unveiled at China's annual parliamentary
session in early March 2020, was endorsed by top leaders at the annual
closed-door Central Economic Work Conference this month, according to
three sources with knowledge of the meeting's outcome.
"We aim to keep next year's growth within a reasonable range, or around
6%," said a source who requested anonymity.
Top leaders pledged to keep economic policies stable while making them
more effective to achieve growth targets in 2020, state media said on
Thursday.
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Next year will be crucial for the ruling Communist Party to fulfill its
goal of doubling gross domestic product (GDP) and incomes in the decade
to 2020.
Economic growth of nearly 6% next year could be enough to meet that goal
given the economy is expected to expand about 6.2% this year, policy
insiders said.
Officials at the National Development and Reform Commission and the
Ministry of Finance were not immediately available for comment on
Saturday.
FISCAL BOOST
The government aims to boost infrastructure investment by allowing local
governments to issue more special bonds next year, but there is less
room for tax cuts, the sources said.
The annual budget deficit could rise from this year's 2.8% of GDP, but
is likely to be kept within 3%, they said.
Local governments could be allowed to issue special bonds worth some 3
trillion yuan ($426.20 billion) in 2020 to fund infrastructure projects,
including 1 trillion yuan front-loaded to this year, they said.
"Fiscal policy will provide a key support for the economy," said one
source.
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Containers are seen at the Yangshan Deep Water Port in Shanghai,
China August 6, 2019. REUTERS/Aly Song
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The central bank is likely to ease policy further to encourage lending and lower
corporate funding costs, but it wants to avoid fanning property speculation and
inflation expectations after consumer inflation hit a near eight-year high in
November, the sources said.
Beijing has unveiled a raft of pro-growth measures this year, cutting taxes and
fees and letting localities issue 2.15 trillion yuan in special bonds, alongside
cuts in reserve requirements and lending rates to boost credit.
But top leaders have ruled out aggressive stimulus for fear of pushing up debt
levels.
A trade deal with the United States could ease pressure on Chinese exporters,
but more policy steps are needed to underpin weak demand at home and abroad,
policy insiders said.
The United States and China cooled their trade war on Friday, announcing an
agreement that reduces some U.S. tariffs in exchange for what U.S. officials
said would be more Chinese purchases of American farm products and other goods.
FINANCIAL RISKS
Top leaders at the meeting listed preventing financial risks as a key priority
for 2020 and called for keeping the debt-to-GDP ratio largely stable.
They also pledged to prepare "contingency plans" to cope with growing global
volatility and risks.
But any sharper slowdown could put more pressure on small firms, which could in
turn hit smaller banks - the most vulnerable part of the banking sector, policy
insiders said.
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Private companies have defaulted on bond payments at a record rate this year,
while capital investment has slowed. A rare state seizure of a regional bank
earlier this year and state rescues of lenders have also sharpened concerns
about the health of small banks.
"Small firms will continue to face big pressure next year, and that could affect
the financial sector," said one insider.
(Reporting by Kevin Yao; Editing by Andrew Galbraith and Michael Perry)
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