Daily Management Review

Modest GDP Growth Target For 2021 Set By China Even As Economy Improves


Modest GDP Growth Target For 2021 Set By China Even As Economy Improves
China – the second largest economy of the world, has set itself a relatively modest annual economic growth at just over 6 per cent for the current year while also setting a target to create more jobs in its cities compared to last year as the economy slowly emerges from the hit to its economy last year because of the Covid-19 pandemic.
Its gross domestic product growth target was dropped by China from the premier's work report in 2020 which was a first for the country since 2002 because of the pandemic hit to the country’s economy. 
"As a general target, China's growth rate has been set at over 6% 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," he added.
China was the only country major economy last year to witness economic growth at 2.3 per cent.
But the target set for 2021 by China was significantly lower compared to the consensus of analysts who had expected the country to set a growth target of more than 8 per cent for the current year. The news resulted in a fall in Chinese shares. 
"If sequential growth averages zero from Q1 to Q4 this year, we will get around 6.1% annual growth this year," Nomura said in a note. "Beijing does not want to set a growth target too close to 8.0% as it does not want to slash the growth target next year," it added.
Setting a modest growth rate target will allow the Chinese authorities to focus more on the quality of growth rather than the quantity, said Aninda Mitra, senior sovereign analyst at BNY Mellon Investment Management.
"In the aftermath of the pandemic, a low bar should allow most provinces to cross the hurdle without over-stretching themselves financially," Mitra said.
Li said in his report delivered at the opening of this year's meeting of parliament that a target of creating more than 11 million new jobs in urban areas of the country has been set by China for 2021. That will be more than the target of 9 million new urban jobs doe last year and was in line with the target set in recent years.
China is also targeting to hold its budget deficit of around 3.2 per cent of GDP for 2021 which will be in line with the an improving economy and lower than the target of over 3.6 per cent of GDP last year.
The cap on the amount of local government special bond issuance was set at 3.65 trillion yuan ($563.65 billion) which was lower than the cap of 3.75 trillion yuan last year. In 2021, plans of issuing of special treasury bonds have also been drawn up by China. The country had issued such bonds for the first time last year to generate revenues in the pandemic hit year.  
The government has set its 2021 target for consumer price inflation at around 3%, compared with a target of around 3.5% last year.