The Chinese government unveiled a conservative master plan for the economy for 2017 as Beijing prepares to undergo a power reshuffle at home while facing mounting uncertainties abroad. At the National People’s Congress gathering on Sunday, Chinese Premier Li Keqiang said the country was aiming for 6.5 per cent growth or “higher if possible” for 2017 – a target slightly less ambitious than last year’s range of 6.5 to 7 per cent. The year-end figure fell in the middle at 6.7 per cent, but still the slowest pace in a quarter-century. Meanwhile, Li said China would face a “more complicated and grimmer” environment and must be highly alert to vulnerabilities in the financial system. <!--//--><![CDATA[// ><!-- //--><!]]> Beijing’s caution signals that economic and social stability remains high on the leadership’s agenda, ahead of the 19th party congress in the autumn and deepening uncertainties arising from Brexit in Europe, and the policies of US President Donald Trump in the United States and Europe. “China is at a crucial and challenging stage in its own development endeavours,” Li said as he read out the annual government work report to the nearly 3,000 NPC deputies gathered in Beijing. “World economic growth remains sluggish while de-globalisation and protectionism are growing.” There were many uncertainties about “the direction of the major economies’ policies and their spillover effects”, which could affect China, he said. Li also suggested that economic growth below 6.5 per cent would be a disappointment, and urged a rate “higher if possible in practice”. Zhang Yunling, a researcher at the Chinese Academy of Social Sciences, said the target reflected the likely focus of the economy this year – slowdown and restructuring – with the 6.5 per cent as a bottom line to ensure employment. “Stability is the best choice for this year,” Zhang said. “Basically keeping stability is the priority, and there are no new major initiatives.” He added that China would face headwinds if Trump carried through with his threats to impose tariffs on China’s exports, label China a currency manipulator or ignore WTO rulings on cases brought against US interests. At home, Beijing will be focused on the so-called supply-side structural reform to deleverage and cut obsolete manufacturing capacity. Li said the government would cut steel capacity by 50 million tonnes and coal by 150 million tonnes this year. For employment, the government set a 4.5 per cent jobless rate in cities, higher than the 4.02 per cent recorded at the end of December, and planned to create more than 11 million new jobs this year – down from the 13.14 million added in last year. Fiscal policy would be more “proactive and effective”, and the deficit to run at 3 per cent of economic output, unchanged from last year, according to the work report, In infrastructure, China will pump 800 billion yuan into new railway works, 1.8 trillion yuan into roads and waterways and begin 15 major hydraulic projects, among other projects, the report said. Monetary policy would be “prudent and neutral”, with the broad M2 money supply to grow 12 per cent. Zhang Yiping, an economist at China Merchants Securities, said Beijing was moving to reduce financial risks and reliance on debt-fuelled growth – China’s total debt surged to 260 per cent of its GDP last year, up from 125 per cent in 2008. Property and the stock market are two sources of risk that the government has been trying to address. Beijing has poured significant funds into the financial system, triggering property bubbles in major cities, with housing prices rising more than 30 per cent in some areas last year. Massive takeover bids, often backed by illicit funds, have exposed holes in the regulatory framework and further concentrated market power in the hands of an elite few. Li said that China must remain alert to “non-performing loans, bond defaults, shadow banking and internet finance”, vowing that China would erect a “firewall against financial risks”. At the same time, independent economists have argued that China probably doesn’t need very strong headline growth. “Anything between 6-6.5 per cent would be appropriate,” said Alfred Schipke, the senior resident representative in China for the International Monetary Fund. “The key is to have sustainable growth.” Additional reporting by Frank Tang