Planners aim at shift to consumption
The central government aims to slow the expansion of capital investment this year, as part of efforts to rebalance the economy in favour of consumption and to keep inflation in check.
In its report to the annual session of the National People's Congress, the National Development and Reform Commission said on Monday that it had set a 16 per cent target for fixed-asset investment growth this year.
Its target last year was 18 per cent, down from 20 per cent in 2010, but the real growth rate in both years was 23.8 per cent, down from 30.1 per cent in 2009.
The planned slowdown is in line with the central government's lowering of its economic growth target this year, and highlights the government's willingness to rebalance the economy by shifting growth away from an over-reliance on capital investment and exports and towards domestic consumption.
On Monday, Premier Wen Jiabao set this year's economic growth target at an eight-year low of 7.5 per cent, a move to enable the government to focus on economic rebalancing and defusing price pressures. He also said boosting consumer demand was the year's first priority as the government looks to wean the economy off relying on external demand and capital investment.
'The country is still facing relatively huge inflationary pressures. Labour costs and land, energy and resource prices are trending higher in the long term, while we can't underestimate imported inflationary factors,' the commission said in a report released to deputies on Monday.
The rapid growth in investment, as the result of an economic-stimulus package introduced to deal with the effects of the global financial crisis, has pushed up inflation, driven property prices up in big cities and increased risks to the banking sector from bad loans.
Wang Tao, chief China economist with UBS Securities, said that while the government wanted to foster consumption growth, it also intended to 'stabilise investment growth'.
'It is widely acknowledged that the stimulus-and-credit expansion in 2008 to 2009 was excessive, and the government is keen to avoid making the same mistake, particularly since the external shock is not nearly as severe as in 2008,' Wang said.
The commission said it was aiming for a 14 per cent rise in retail sales this year, down from last year's target of 16 per cent.
Wang said boosting consumption required structural reforms to increase household incomes and lower the rate of savings, which would take time.
Wen promised on Monday that more wealth would be shared by hundreds of millions of farmers and migrant workers who remained reluctant to spend.
But Wang said the government usually resorted to supporting investment to prop up economic growth in the short term.
The commission also said it aimed to attract US$120 billion in foreign direct investment this year, up 3.5 per cent from last year, and it forecast US$66 billion worth of outbound direct investment by domestic companies, up 10 per cent.
The mainland will expand imports of agricultural products and strictly control corn processing for non-feed purposes.
The central government has set the economic growth target for the year at this figure, which is an eight-year low