China drops annual GDP growth target for the first time

BEIJING: China dropped its annual growth target for the first time on Friday and pledged more government spending as the COVID-19 pandemic hammers the world’s second-biggest economy.

The omission from Premier Li Keqiang’s work report during this year’s meeting of parliament marks the first time China has not set a target for gross domestic product (GDP) since the government began publishing such goals in 1990.

The economy shrank 6.8% in the first quarter, the first contraction in decades, hit by the outbreak of the new coronavirus. “We have not set a specific target for economic growth for the year, mainly because the global epidemic situation and economic and trade situation are very uncertain, and China’s development is facing some unpredictable factors,” Li said at the start of parliament.

Domestic consumption, investment and exports are falling, and the pressure on employment is rising significantly, while financial risks are mounting, he warned. China has set a target to create over 9 million urban jobs this year, according to Li’s report, down from a goal of at least 11 million in 2019 and the lowest since 2013.

Ahead of the National People’s Congress, the week-long meeting of parliament, China’s top leaders promised to boost stimulus to bolster the economy amid rising concerns that job losses could threaten social stability.

Beijing is also planning security legislation for Hong Kong, which Li said will provide a sound legal system and enforcement mechanisms, drawing criticism from the United States and Hong Kong activists.

China is targeting a 2020 budget deficit of at least 3.6% of GDP, above last year’s 2.8%, and fixed the quota on local-government special bond issuance at 3.75 trillion yuan ($527 billion), up from 2.15 trillion yuan.

The government will issue 1 trillion yuan in special treasury bonds this year, the first such issuance. It will transfer 2 trillion yuan raised from the bigger 2020 budget deficit and special anti-coronavirus treasury bonds to local governments, Li said.

Local government bonds could be used to fund infrastructure projects, while special treasury bonds could be used to support firms and regions hit by the outbreak. In line with the slower economy, China will raise defence spending by 6.6% this year, the slowest in three decades, while the budget for environmental protection will increase a modest 4%.