• Mon
  • Dec 22, 2014
  • Updated: 10:10pm

GDP growth target flexible as jobs take priority, says Premier Li Keqiang

Increasing employment more important than fixed target for GDP expansion, premier says, in clearest sign nation can tolerate slower growth

PUBLISHED : Thursday, 13 March, 2014, 12:48pm
UPDATED : Friday, 14 March, 2014, 5:29pm

The official economic growth target will be flexible as long as it can ensure stable jobs, Premier Li Keqiang told an international audience in the clearest message to date by a top leader about the nation's willingness to tolerate slower growth.

Li said after the closing of the annual National People's Congress session yesterday that the nation must be prepared for more complex challenges.

"We need to ensure steady growth and employment, avert inflation and defuse risks," he said. "We also need to raise the quality and efficiency of China's economic development and tackle pollution and save energy. We need to strike a proper balance among all these ... This is not going to be easy."

Watch: Chinese Premier Li Keqiang  says debt defaults 'hardly avoidable'

Leaders have pledged to shift China's growth model from chasing high growth to improving quality as it tackles overcapacity, pollution, slowing external demand for its exports and social unrest fuelled by a widening wealth gap.

Communist Party leaders also decided last year that gross domestic product growth would no longer be the sole gauge for local officials' performance.

"We have the capability and conditions to keep economic growth within a proper range this year," Li said. "We set the GDP growth target at about 7.5 per cent. But this "about' shows there is a level of flexibility here."

He said leaders were more concerned about employment. "What we care about is people's livelihoods," he said, adding that GDP growth was important for its impact on employment.

Leaders hope to add more than 10 million urban jobs each year, as well as work for between six million and seven million rural migrants in the cities. "Therefore, we need appropriate GDP growth," Li said.

While he did not specify a bottom line for economic growth, in a speech last year the premier said China would need at least 7.2 per cent growth to create those 10 million new jobs each year. Last year, the mainland's GDP expanded 7.7 per cent, slowing from recent peak rates of above 10 per cent.

The official Gini coefficient, a gauge of wealth inequality, widened to 0.473 at the end of last year, a big jump from 0.3 about 25 years ago. A figure above 0.4 is regarded internationally as the danger level above which social unrest is more likely to occur.

"The right path is to make employment, rather than GDP growth, the priority," Beijing Institute of Technology professor Hu Xingdou said.

The mainland's real jobless rate might be higher than 20 per cent, Hu estimated, although controversial official data showed that the urban jobless rate had for many years stayed between 4 and 5 per cent. The official data excludes migrant workers and some staff laid off from state-owned enterprises.

"A too-high jobless rate could cause crime rates to rise and fuel social unrest," the professor said.

Li said the country could maintain economic growth while reducing the severe pollution which he acknowledged had become a health risk and a source of public discontent.

"The first thing many people do in the morning is check readings for PM2.5 pollution," Li said.

Levels of PM 2.5 pollutants - tiny particles smaller than 2.5 microns wide that are regarded as most dangerous to health - were now monitored in 161 of 660 cities and territories, he noted.


For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive



This article is now closed to comments

Downward pressure on the economy is also one of the biggest challenges Li has to face this year.
The yuan is now most probably overvalued.
China is facing the risk of deflation or internal devaluation if the yuan's exchange rate doesn't drop enough in the near future.
The economic concept underlying the above argument is nothing new or special --- it's just David Hume's price-specie flow mechanism under a gold standard.
It's said that David Hume is even smarter than Adam Smith.
One way out for China is to devalue (relatively massively) the yuan against the US dollar.
The present relatively small degree of yuan's devaluation is not enough to make much difference --- the yuan may be overvalued by more than 10%.
Whether the yuan's trading band should be widened from one to two percent, or whether the currency speculators should be taught a lesson, are simply trivial in comparison to the risk of slowing performance of the whole economy.
Despite widespread arguments to the contrary, in the foreseeable future the yuan should not be revalued vis-a-vis the US dollar any further.
China's exporting firms (many of them are innovative SMEs), and all those firms in the related industries, can then earn more to repay or rollover their accumulated debts even at high interest rates.
Original jobs can be maintained, or more jobs may be created as a result.
And of course it's then easier to reach the specified GDP growth target.


SCMP.com Account