China Focuses on Jobs and Quality of Life

14 Mar

China’s growth engine continued to show signs of weakness on Thursday, underlining the tricky balancing act that Beijing faces as it tries to reform its economy.

Retail, manufacturing and investment all slowed in the beginning of the year, a situation that raises questions about China’s ability to achieve its growth targets. But China’s premier reiterated that the goals were flexible, as the government focuses on a host of economic issues.

Speaking at a news conference in Beijing on Thursday, Premier Li Keqiang said that job growth and quality-of-life issues like the battle to reduce air pollution took precedence over the headline growth figure. China needs to create 10 million jobs, he added. He also said that further bond defaults were inevitable, as China remakes its financial system and rules. But he added that the government would do its best to ensure that bad debt did not roil the broader system.

“We are not preoccupied” with the gross domestic product growth, said Mr. Li, whose comments came at the end of the annual meeting of the Chinese legislature, the National People’s Congress. “The G.D.P. growth we want is one that brings real benefits to our people, helps raise the quality and efficiency of economic development and contributes to energy conservation and environmental protection.”

Last week, Beijing set its goal for economic growth this year at 7.5 percent, a slight slowdown from the 7.7 percent achieved in 2013 and a big deceleration from the frequent double-digit growth rates of the last three decades. But it would generate the job growth needed to secure social stability, which is crucial for Chinese policy makers.

The data released Thursday suggested that the target might be hard to achieve. Industrial output, retail sales and investment in January and February all grew far less energetically than analysts had expected, according to figures released by the national statistics office.

For industrial output, the expansion of 8.6 percent for the two months, compared with the same period last year, was the weakest since April 2009. Retail sales growth, at 11.8 percent, was the weakest since early 2011. Investment in fixed assets rose 17.9 percent, the weakest pace in more than a decade. The January and February figures were grouped together to reduce distortions from the Lunar New Year holiday, which moves from year to year and can fall in either month.

To some extent, the slowdown in China’s growth is the result of deliberate engineering by policy makers. Beijing realizes that the economy must shift away from exports and heavy manufacturing, and toward consumption-led growth,.

At the same time, it is trying to rein in the sometimes-inefficient lending that has taken place during the last few years. Analysts widely welcome this approach, but it has also weighed on business activity by making it harder or more expensive for companies to obtain credit.

Many analysts now say they believe that the government may once again increase its efforts to prop up the economy — for example by removing some constraints on bank lending — if growth slows too much.

“If pressures on growth persist, we expect the government to look for ways to support growth, which would likely include easing up on the monetary stance,” Louis Kuijs, chief China economist at the Royal Bank of Scotland in Hong Kong, wrote in a research note.

Although Mr. Kuijs does not see risks of systemic problems or instability anytime soon, he said, “Financial markets would continue to remain anxious and nervous about financial risks in China, thus keeping financial asset prices subdued and sentiment bearish.”

Source

http://www.nytimes.com/2014/03/14/business/international/data-weak-as-china-gets-ready-to-transform.html?hpw&rref=business&_r=0

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