China maintains growth target at 7.5 pct; focus shifts to reforms

[cirr]

Tue Mar 4, 2014 7:45pm EST

By Kevin Yao

(Reuters) - China announced on Wednesday it would maintain its economic growth target for 2014 at about 7.5 percent, as expected, signalling that its policy focus would be slanted in favour of reforms and rebalancing the economy.

Premier Li Keqiang, in a report to the National People's Congress at the start of its annual session, also said the government would maintain an inflation target of around 3.5 percent for 2014. Broad M2 money supply growth would be kept at 13 percent, also widely expected.

"That should mean policymakers have enough room to ensure growth remains within a comfortable range while delivering the reforms," HSBC said in a note in the build up to the parliament session.

Li announced that authorities would set up a deposit insurance scheme, which analysts have described as a step toward China's declared goal of freeing up bank deposit rates.

He also said the government would push forward reform of the yuan exchange rate. Convertibility of the yuan on the capital account would be brought forward, Li said.

The government plans for a 15.3 trillion yuan ($2.5 trillion) budget in 2014, which would produce a deficit of about 2.1 percent of GDP, unchanged from the actual shortfall in 2013, the finance ministry said.

The country's top economic planning agency said in a report to parliament that the government will target 17.5 percent annual growth in fixed-asset investment and 14.5 percent in retail sales growth in 2014.

China's fixed-asset investment - a main growth driver - grew 19.6 percent in 2013, whileretail sales rose 11.3 percent. The economy expanded 7.7 percent last year.

At a plenum meeting of the ruling Communist Party last November, China announced ambitious reforms that signalled the shift of the world's second-biggest economy from investment- and export-fuelled growth towards a slower, more balanced and sustained expansion.

Wednesday's announcements signal that it is well on track, but moving cautiously.

Some changes, such as government downsizing or closures of debt-laden factories in sectors gripped by overcapacity, are likely to take a back seat to avoid fuelling job losses and undermining social stability, analysts say.

Policymakers are aware that an abrupt slowdown resulting from a rebalancing of the economy, and job losses and bankruptcies, could derail the reform agenda.

"Anyone hoping for a re-run of the excitement around last year's third plenum will be disappointed," Mark Williams and Qinwei Wang at Capital Economics in London wrote in a note.

"Nonetheless the congress should at least give us a better sense of the government's priorities and objectives for the rest of the year."

Li, China's first premier with an economics doctorate, has vowed to push painful changes "like a warrior cutting his wrist", but signs of fragility in the economy suggest reforms will be cautious and gradual.

During the parliament meeting, key government ministries and the central bank will hold a series of press briefings to cover a wide range of economic and social issues.

Li is scheduled to hold a news conference at the end of the parliament meeting on March 13.

UPDATE 1-China maintains growth target at 7.5 pct; focus shifts to reforms| Reuters

 

[cirr]

China to accelerate Australia free trade agreement
March 5, 2014

• Read later

Philip Wen

China correspondent for Fairfax Media

BEIJING

Chinese Premier Li Keqiang delivers a work report during the opening session of the annual National People's Congress in Beijing's Great Hall of the People. Photo: Ng Han Guan

China will "accelerate" negotiations for a free trade agreement with Australia, Premier Li Keqiang has said in his opening speech to the National People's Congress.

Delivering his first government work report as Premier at the Great Hall of the People in Beijing on Wednesday, Mr Li said China would maintain its annual economic growth target at "about" 7.5 per cent, signalling an unwillingness to allow growth to slow - even as he warned of "great" downward pressure on his country's economy, and reiterated the urgent need for China to push through reforms to restructure its economy.

"We are at a critical juncture where our path upward is particularly steep," he said, adding that the global economic recovery remained unstable and uncertain.

"The basic conditions underpinning development are undergoing profound changes; deep-seated problems are surfacing; painful structural adjustments need to be made; the pace of economic growth is changing and downward pressure on the economy remains great."

Mr Li also flagged a move toward a wider trading range for the Chinese yuan, and to grant financial institutions greater power to set their interest rates.

"We will keep the renminbi exchange rate basically stable at an appropriate, balanced level, expand its floating range, and move toward renminbi convertibility under capital accounts," he said.

Economists expressed concern that China's failure to reduce its growth target may show a lack of determination in ramming home much-needed economic reforms as China rebalances its economy away from investment-led growth, and more toward consumer-led growth.

ANZ's chief China economist, Liu Li-Gang, said maintaining the growth target at 7.5 per cent will delay reforms and required a "significant" easing of credit conditions and ramp up in government spending.

Mr Liu said the government would have been "wise" to set the growth target within a range of 7 per cent to 7.5 per cent. China's economy grew at 7.7 per cent last year, its slowest rate in 14 years.


Read more: China to accelerate Australia free trade agreement

 

[cirr]

China says 2014 military budget to rise 12.2 percent

BEIJING Tue Mar 4, 2014 7:44pm EST

Paramilitary policemen stand in formation as they pay tribute to the Monument to the People's Heroes on Tiananmen Square in Beijing, November 17, 2013.

CREDIT: REUTERS/STRINGER

(Reuters) - China will increase military spending by 12.2 percent this year to 808.23 billionyuan ($131.57 billion), the government said on Wednesday, partly to beef up coastal and air defenses and to develop more high-tech weapons.

The government announced its spending plan for the 2.3 million-strong People's Liberation Army (PLA) at the opening of parliament's annual meeting. The increase builds on a nearly unbroken run of double-digit hikes in the defense budget for the past two decades.

"We will comprehensively enhance the revolutionary nature of the Chinese armed forces, further modernize them and upgrade their performance, and continue to raise their deterrence and combat capabilities in the information age," Premier Li Keqiang told the largely rubber-stamp legislature.

Li added that China would "strengthen research on national defense and the development of new- and high-technology weapons and equipment" and "enhance border, coastal and air defenses".

China's military spending is now second only to that of the United States, allowing Beijing to create a modern force that is projecting power deep into the disputed waters of the East and South China Seas.

Much military spending takes place outside the budget, however, and many experts estimate real outlays are closer to $200 billion. The U.S. Defense Department's base budget for fiscal 2014 is $526.8 billion.

At a time when Washington has stepped up its military presence in the region as part of a strategic "pivot" toward Asia, China is building new submarines, surface ships and anti-ship ballistic missiles, and has tested emerging technology aimed at destroying missiles in mid-air.

It carried out the first test flight of a stealth fighter jet in 2011 and has put a refurbished aircraft carrier to sea.

Nevertheless, experts say it could be decades before China's military is a match for America's armed forces.

David Helvey, U.S. deputy assistant secretary of defense for East Asia, told a U.S. Senate committee hearing on Tuesday that the Pentagon was seeking to build "healthy" ties with China's military, but said Beijing needed to be more transparent about its armed forces buildup.

"We remain concerned about a lack of transparency regarding China's growing military and its increasingly assertive behavior in the maritime domain," Helvey said.

China has repeatedly said the world has nothing to fear from its military spending, which it says is needed for legitimate defensive purposes.

Its neighbors, however, have become increasingly nervous about Beijing's expanding military, and the latest double-digit rise could reinforce disquiet in the region.

China and Japan have locked horns over uninhabited rocky islands each claims in the East China Sea.

Beijing also claims 90 percent of the 3.5 million sq km (1.35 million sq mile) South China Sea, which is believed to be rich in oil and gas. The Philippines, Vietnam, Malaysia, Brunei and Taiwan claim parts of those waters.

The United States last month said it was concerned that China's maritime claims in the South China Sea were an effort to gain creeping control of oceans in the Asia-Pacific region.

China says 2014 military budget to rise 12.2 percent| Reuters

 

[Lux de Veritas]

There are some flaws in PRC economics structure but nevertheless, it is not entirely bad and has contributed to USA transfer of technology to PRC. PRC does not do the entire right thing as she follows the neo-colonial model of Japan and 4 Asian dragon, developing her economy via exporting to USA.

Japan+Tiger follow such model because they lack resources and market, besides they are neo-colony of USA. In PRC case, she is entirely different.

USA and HK shipped a bag of chicago neo liberal economist and elites to PRC, who are the culprit in teaching PRC such model.

The neo-colonial economic policy will condemn PRC to perpetually subsidizing USA consumers while suppressing a large part of her citizen from consuming.

Is there a better model? The Nazi economics from 1933-1939 is a well kept secret and is being denigrated by all economist. Hitler if he did not start WW2 and killed Jews will be hailed as a brilliant leader who brought the entire nations out of rentier captive.

By issuing sovereign credits, enriching the people, that result in increase in domestic production which quickly move Germany unemployment rate to virtually 0% by 1936, notwithstanding when Hitler started ruling in 1933, Germany was the most broke country in Europe. The economics problem Hitler was facing and he was able to solve it within 3 years while Obama, and all western leaders, being rentier class themselves have no will of improving the life of people.

Chairman Xi seems to be a wise leader who is going to correct the structure. By using domestic consumption instead of US consumer to solve PRC economics problem, if succeed, Chairman Xi will usher a true China golden age.

 

[cirr]

China's reform progress tops congress agenda

By Sophia Yan @sophia_yan
March 4, 2014: 8:32 PM ET

China kicks off its annual parliamentary meetings in Beijing Wednesday.

HONG KONG (CNNMoney)

China's annual parliamentary meetings kick off Wednesday, offering Beijing a chance to gauge progress on key economic reforms outlined last year.

The National People's Congress, often criticized as mere political theater, remains an opportunity for top Communist Party brass to reveal new plans and announce economic targets. This year's meetings are of particular note -- it's the first such gathering that President Xi Jinping and Premier Li Keqiang will preside over, since assuming their top posts a year ago.

Beijing promised a slate of reforms last year at two major political meetings, broadly pledging to clean up corruption, stabilize economic growth, and open up China's financial markets. That was on top of social measures that aimed at clearing heavy pollution and easing family planning policies.

The reform measures are nothing if not ambitious. Capital Economics called one laundry list of proposals "the most impressive statement of reform intentions that we've seen this century." But the big question is whether Beijing will follow through on its promises. Some reform initiatives -- such as reforming state-owned companies, managing local government debt and fiscal reform -- have lacked specifics.

Related story: China's anti-corruption drive eats into growth

Xi's sweeping anti-corruption campaign has placed a number of government officials and company executives under investigation. Officials have been banned from conspicuous spending -- no more extravagant banquets, riding in showy cars and gifting luxury items. Some critics say the crackdown is more about knocking out political opponents, but either way, it's a move that has gathered significant momentum.

China has also begun testing a number of financial reforms in a free-trade zone in Shanghai, including greater foreign investment access and experimentation with market-based interest rates.

Related story: Beijing loses billions as rich skip taxes


Baidu, Alibaba challenge Chinese banks

More recently, the People's Bank of China has allowed the tightly-pegged yuan to fluctuate a bit more than usual -- a possible sign that Beijing is getting serious about building a more market-driven economy.

Despite these strides, China still faces an uphill battle in implementing some reforms, especially in the face of slowing economic growth. While economists agree China needs to change, gains may not be reflected in the economy for years.

Related story: The economics of China's one-child policy

Looking ahead, there are a number of areas that experts say the government must still address, including tax reform, shadow banking regulation, food safety and shoring up the country's social safety net.

Tackling even just one of those could help alleviate a number of major challenges. Tax reform, for example, "is crucial for addressing local government debt, property bubbles, and financial risk," analysts at Barclays wrote in a recent research note.

China's reform progress tops congress agenda - Mar. 4, 2014

 

[bolo]

China's reform progress tops congress agenda

By Sophia Yan @sophia_yan
March 4, 2014: 8:32 PM ET

China kicks off its annual parliamentary meetings in Beijing Wednesday.

HONG KONG (CNNMoney)
China's annual parliamentary meetings kick off Wednesday, offering Beijing a chance to gauge progress on key economic reforms outlined last year.

The National People's Congress, often criticized as mere political theater, remains an opportunity for top Communist Party brass to reveal new plans and announce economic targets. This year's meetings are of particular note -- it's the first such gathering that President Xi Jinping and Premier Li Keqiang will preside over, since assuming their top posts a year ago.

Beijing promised a slate of reforms last year at two major political meetings, broadly pledging to clean up corruption, stabilize economic growth, and open up China's financial markets. That was on top of social measures that aimed at clearing heavy pollution and easing family planning policies.

The reform measures are nothing if not ambitious. Capital Economics called one laundry list of proposals "the most impressive statement of reform intentions that we've seen this century." But the big question is whether Beijing will follow through on its promises. Some reform initiatives -- such as reforming state-owned companies, managing local government debt and fiscal reform -- have lacked specifics.

Related story: China's anti-corruption drive eats into growth

Xi's sweeping anti-corruption campaign has placed a number of government officials and company executives under investigation. Officials have been banned from conspicuous spending -- no more extravagant banquets, riding in showy cars and gifting luxury items. Some critics say the crackdown is more about knocking out political opponents, but either way, it's a move that has gathered significant momentum.

China has also begun testing a number of financial reforms in a free-trade zone in Shanghai, including greater foreign investment access and experimentation with market-based interest rates.

Related story: Beijing loses billions as rich skip taxes


Baidu, Alibaba challenge Chinese banks

More recently, the People's Bank of China has allowed the tightly-pegged yuan to fluctuate a bit more than usual -- a possible sign that Beijing is getting serious about building a more market-driven economy.

Despite these strides, China still faces an uphill battle in implementing some reforms, especially in the face of slowing economic growth. While economists agree China needs to change, gains may not be reflected in the economy for years.

Related story: The economics of China's one-child policy

Looking ahead, there are a number of areas that experts say the government must still address, including tax reform, shadow banking regulation, food safety and shoring up the country's social safety net.

Tackling even just one of those could help alleviate a number of major challenges. Tax reform, for example, "is crucial for addressing local government debt, property bubbles, and financial risk," analysts at Barclays wrote in a recent research note.

China's reform progress tops congress agenda - Mar. 4, 2014

Whatever barclays, ubs or any western analysts advice China to do, just do the opposite and China will be fine.