China lowered its goal for economic growth and announced a major tax cut, as policy makers seek to pull off a gradual deceleration while grappling with a debt legacy and the trade standoff with the US.
The target for expansion of gross domestic product, released on Tuesday morning in Premier Li Keqiang’s annual report to the National People’s Congress, was set for 2019 at a range of 6 to 6.5 per cent. The target was shifted to a band in contrast to the previous practice of using a point figure, giving policy makers room to manoeuvre in a time of turbulence. Last year’s target was “about” 6.5 per cent.
The lower bound of the GDP target would be the slowest pace of economic growth in almost three decades, a consequence of China’s long deceleration since the double-digit pace of the mid 2000s. Economists surveyed by Bloomberg see output growth slowing to 6.2 per cent this year from 6.6 per cent in 2018, before easing further in 2020 and 2021.
“The target signals the intended trajectory – and by extension, the policies needed to achieve it,” Chang Shu and David Qu at Bloomberg Economics wrote in a note ahead of the Work Report. “For now, the focus will tilt to growth stabilisation, and away from medium-term financial stability.”