The International Monetary Fund (IMF) said recently that China’s debt had ballooned and was now equivalent to 234% of the total output. It said China needed to concentrate less on growth and instead help improve banks’ finances, among other efforts.
Meanwhile, the Chinese government says it has been taking steps to contain risky debt despite the impact that might have on economic growth – efforts the IMF said it recognized.
The government has promised to continue tackling local government debt, among other efforts, and on January 18 vowed to help state-owned enterprises “leverage and cut debt … and to repay their bonds on time this year”.
China’s strict anti-pollution measures, which were introduced across 28 cities in 2017, are also expected to hurt economic growth in the short term.
The measures have included shutting down or cutting back production at factories in heavy industry like cement and steel.
Households have also been asked to switch to natural gas and electricity from coal, in an effort to curb pollution.
However, this policy left millions without proper heating, and so was temporarily abandoned in December.
According to officials, Beijing’s air quality improved sharply in the winter of 2017. They also heralded their efforts as a “new reality” for China.
Li Keqiang said he would tackle state “zombie enterprises” producing more coal and steel than the market needed.
Similar pledges in the past have proved hard to fulfill.
More than 3,000 legislators are meeting in the Great Hall of the People.
The NPC and its advisory body hold ceremonial meetings every year known as “lianghui” or “two sessions”.
Image source Flickr
PM Li Keqiang described the world’s second-largest economy as a butterfly struggling to emerge from a chrysalis.
The premier said this transformation was filled with promise but also great pain.
Li Keqiang repeatedly paid tribute to Communist Party leader Xi Jinping and said that under the sound leadership of the Party, the Chinese people had the courage and ingenuity to overcome all difficulties.
His list of China’s difficulties ranged from the smog which blankets much of the country to the laziness of some government officials.
In a veiled reference to President Donald Trump’s complaints about China’s exchange rate and trade policies, PM Li Keqiang warned of a far more complicated global picture in the year ahead with China facing the threat of growing protectionism.
NPC leaders are tolerating slightly slower economic growth this year to give them more room to push through some painful reforms to deal with a rapid build-up in debt, Reuters reports.
On the subject of tackling China’s pollution issues, Li Keqiang pledged to “work harder” to address the issue exacerbated by heavy industry.
This year’s “lianghui” comes ahead of a major Chinese Communist Party congress, due to be held later this year.
That congress will confirm party chief and President Xi Jinping’s second term in office, as well as announce changes in the party’s top leadership.
According to official figures, the Indian economy grew at an average rate of 7.5% in 2015, faster than the 6.9% growth in China.
In recent history it has been unusual, but not unprecedented, for India to grow faster than China.
It happened in 1981,1989,1990 and 1999, and 2015 was the first instance in this millennium, according to the IMF.
India’s government said growth in the October to December quarter was 7.3%, a slight drop on previous quarters which were revised sharply higher.
Even though the economy lost steam in the last quarter, its pace of expansion was faster than the growth posted by China in the same quarter.
India measures its economy over a fiscal rather than a calendar year.
The government of Narendra Modi said the Indian economic growth for the fiscal year ending March 2016 is forecast to accelerate to 7.6%.
However, some economists say the latest growth figures are at odds with other data for Asia’s third largest economy, including weak exports, railway freight, cement production and investment and flat order books.
A year ago India’s statistics ministry revised GDP growth rates higher – closer to that of China – by updating the base year used for price comparisons.
The Chinese economy grew by 6.9% in 2015, compared with 7.3% in 2014, marking its slowest growth in 25 years.
China’s growth, seen as a driver of the global economy, is a major concern for investors around the world.
The government had set an official growth target of “about 7%” for the world’s second-largest economy.
PM Li Keqiang has said weaker growth would be acceptable as long as enough new jobs were created.
However, some observers say its growth is actually much weaker than official data suggests, though Beijing denies numbers are being inflated.
Analysts said any growth below 6.8% would likely fuel calls for further economic stimulus. Economic growth in Q4 of 2015 edged down to 6.8%, according to China’s national bureau of statistics.
After experiencing rapid growth for more than a decade, China’s economy has experienced a painful slowdown in the last two years.
Some argue that China’s focus on creating an economy driven by consumption is misplaced. They say as the country attempts to rebalance its economy, it should focus on productivity in order to sustain high growth.
According to latest figures, growth in China’s investment and factory output in August 2015 has come in below forecasts, in a further indication that the world’s second-largest economy is losing steam.
Factory output grew by 6.1% from the year before – below forecasts of 6.4%.
Growth in fixed-asset investment – largely property – slowed to 10.9% for the year-to-date, a 15-year low.
Growing evidence that China’s economic powerhouse is slowing down has caused major investment market falls.
Other indications that China’s economy is weakening can be seen in falling car sales and lower imports and inflation.
Chinese manufacturers cut prices at their fastest pace in six years, largely on the back of a drop in commodity prices, which have dropped sharply over the past year as demand from China faltered.
Last week, Chinese PM Li Keqiang, said his country remained on track to meet all its economic targets for this year despite the economic data.
China has already cut interests rates five times since November 2014 to encourage lending and spur economic activity, along with other measures to boost growth.
PM Li Keqiang pledged that China would take more steps to boost domestic demand and that it would implement more policies designed to lift imports.
China recently revised down its 2014 growth figures from 7.4% to 7.3% – its weakest showing in nearly 25 years.
For 2015, the Chinese government is targeting annual economic growth of about 7%.
Meanwhile, the Chinese authorities said they would take new steps towards a more market-based economic system by offering shares in state-owned businesses to private investors.
The move, which they said would help improve corporate governance and asset management, is planned to take place before 2020.
China’s industrial economy is dominated by 111 conglomerates which are state owned.
China’s economic growth beat expectations in Q2 2015, but it was still the weakest showing since the global financial crisis.
The world’s second largest economy grew 7% from a year ago – matching growth in Q1 2015, which was the lowest since 2009 when it fell to 6.6%.
A weaker property market and factory production have hampered growth.
Meanwhile, Beijing has rolled out a series of stimulus measures amid the slowdown.
The central bank cut interest rates for the fourth time since November last month to boost economic activity.
Economists are, however, continuing to call for more easing despite the better-than-expected numbers as volatility in the stock markets has sparked concerns of financial turmoil in China.
Growth was expected to dip below the 7% mark and come in at 6.9% for Q2 2015.
The mainland’s benchmark index, the Shanghai Composite, had lost almost a third of its value in the three weeks from mid-June.
The positive growth figures failed to excite investors with the index down 2.4% to 3,830.49 points, while Hong Kong’s Hang Seng index was lower by 0.5% to 24,995.95.
On a quarterly basis, China’s economy expanded 1.7% from April to June, compared to the 1.4% revised figure in Q1 2015.
The government has also had to respond to suggestions that the better data may have been “inflated”.
The National Bureau of Statistics said on July 15 that the data reflecting the positive changes in the economy was “hard won”, and accurate.
Julian Evans-Pritchard, China economist at Capital Economics said that while actual growth is “almost certainly” a percentage point or two slower than the official figures show, it does point to signs of a stabilizing economy.
“More broadly, with the drag from the structural slowdown in property and heavy industry now easing, we think that growth is on track to slow only gradually over the course of the next few years,” he said in a note.
Industrial production and retail sales in June were all above forecasts, while fixed-asset investment, a major driver of the economy, also beat expectations in the period.
China’s growth slowed further in Q1 2015, expanding 7% compared to a year earlier, its slowest pace since the global financial crisis in 2009.
The rate was lower than the 7.3% posted for Q4 2014.
In 2014, China’s economy, which is the world’s second largest, grew at its slowest pace since 1990.
It expanded by 7.4% in 2014, missing its annual growth target of 7.5% for the first time in 15 years.
Despite the slowdown, the Chinese economy was still one of the world’s fasting-growing and analysts have said it was proving to be more resilient than expected.
However, they have also said that slower growth, together with China’s cooling property market – a key economic driver – was likely to mean further easing by its central bank this year, including further rate cuts among other measures.
In February 2015, the People’s Bank of China unexpectedly cut interest rates for the second time since last November.
Interest rate cuts together with injections of liquidity are some of the tools Beijing uses to fine tune its economic growth.
The latest growth numbers were by no means a hard landing – which some had feared – and were in line with the latest government target, analysts said.
In Q1 2009, amid the financial crisis, China’s economy expanded 6.6% from a year earlier.
China also released industrial production (IP) figures on April 15 which fell to 5.9% month-on-month in March, down from forecasts for an expansion of 6.9% and the lowest since 2008.
Analysts said these figures were more glaring than the growth data.
Markets were lacklustre following the numbers however, with Hong Kong’s Hang Seng index up 0.7% and the benchmark Shanghai Composite flat, up just 0.01% at 4,135.91.