Expected 2021 growth rate is far below what economists are forecasting as Beijing aims for more sustainable development.
China has set a modest annual economic growth target, at above 6 percent and pledged to create more jobs in cities than last year, as the world’s second-biggest economy emerged from a year disrupted by the effects of COVID-19.
In 2020, China dropped a gross domestic product (GDP) growth goal from the premier’s work report for the first time since 2002 after the pandemic devastated its economy.
“As a general target, China’s growth rate has been set at over 6 percent for this year,” Premier Li Keqiang said in his 2021 work report. “In setting this target, we have taken into account the recovery of economic activity.”
“In 2021, China will continue to face many development risks and challenges but the economic fundamentals that will sustain long-term growth remain unchanged,” said Li. “A target of over 6 percent will enable all of us to devote full energy to promoting reform, innovation, and high-quality development.”
China’s GDP expanded by 2.3 percent last year, the only large economy to see growth.
But the 2021 goal was significantly below the consensus of analysts, who expect growth could beat 8 percent this year. Chinese shares fell.
“If sequential growth averages zero from [the first quarter to the fourth quarter] this year, we will get around 6.1 percent annual growth this year,” investment bank Nomura said in a note.
“Beijing does not want to set a growth target too close to 8 percent as it does not want to slash the growth target next year.”
Aninda Mitra, a senior sovereign analyst at BNY Mellon Investment Management, said the modest growth goal will allow the authorities to emphasise the quality of growth rather than its quantity.
“In the aftermath of the pandemic, a low bar should allow most provinces to cross the hurdle without overstretching themselves financially,” Mitra said.
In 2021, China will aim to create more than 11 million new urban jobs, Li said in his report delivered at the opening of this year’s meeting of parliament, or National People’s Congress.
This is up from an objective of creating more than nine million new urban jobs last year and in line with recent years.
Also in keeping with an improving economy, the government is aiming for a 2021 budget deficit of about 3.2 percent of GDP, less than its goal of above 3.6 percent last year.
The quota on local government special bond issuance was set at 3.65 trillion yuan ($563.65bn), also down from 3.75 trillion yuan ($579bn) last year.
China also has no plan to issue special treasury bonds this year, after issuing such bonds for the first time last year to support the virus-hit economy.
The government has set its 2021 target for consumer price inflation at approximately 3 percent, compared with a goal of about 3.5 percent last year.
It also said it will increase its annual research and development spending by more than 7 percent over the next five years, with expenditure on basic research increasing by 10.6 percent in 2021.