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Opinion | Can China boost short-term growth while maintaining long-term prospects? Li Keqiang may have the blueprint
- By lowering expectations slightly, promising enough reforms to satisfy the US and enough stimulus to stave off a major slowdown, China’s 2019 plans walk a thin – but important – line
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Premier Li Keqiang’s government work report, unveiled on the opening day of the National People’s Congress, argued that Beijing would do well to safeguard near-term growth without undermining the long-term sustainability of the economy.
The question is: can Beijing achieve this daunting task against a challenging local and global backdrop, and with a smaller policy toolkit to deploy compared with five or 10 years ago?
Let’s take a look at what has been proposed for the task. First, the government has cut this year’s growth target to 6-6.5 per cent from “around 6.5 per cent” last year. This serves two purposes. First, it puts less pressure on Beijing to aggressively stimulate the economy, which may exacerbate the trade-off between speed and quality of growth. Second, expressing the target as a range gives Beijing greater flexibility to manage the economy in an uncertain, fast-changing environment.
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Overall, the new growth target suggests that the central government understands the prevailing economic challenges, and is becoming more tolerant of slower growth in exchange for better-quality growth.
Second, Beijing has vowed to step up policy support, without which the bottom line of the growth target may not be defendable against economic headwinds that are growing stronger.
Even though the policy stance, on paper, has been kept the same – with “proactive” fiscal policy and “prudent” monetary policy – in reality, it is set to feature more stimulus measures.
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