China Cuts Growth Forecast, Warning of “Deep-seated” Economic Problems
By Nick Beams
Global Research
March 06, 2015
The Chinese government has lowered its official projection for economic growth this year to “approximately 7 percent” following a year that saw the lowest economic expansion in a quarter of a century.
Chinese Premier Li Kequiang announced the target in his opening address to the annual National People’s Congress which began in Beijing yesterday.
Presenting a gloomy outlook for the world’s second largest economy, he said:
“The downward pressure on China’s economy is intensifying. Deep-seated problems in the country’s economic development are becoming more obvious. The difficulties we are facing this year could be bigger than last year. The next year is a crucial year for deepening all-round reforms.”
In a further sign of economic problems, Li said the government planned this year to run its biggest deficit since the global financial crisis. The deficit will rise to 2.3 percent of gross domestic product this year, compared to 2.1 percent last year. Some of the additional money will be spent on railway, water and agricultural projects, but the chairman of the government’s economic planning agency Xu Shaoshi said it should not be seen as a “massive stimulus.”
Li said the new growth target was what was needed and what was possible, adding that China’s growth model was inefficient and that “difficult structural adjustments” were necessary in order to absorb the effects of previous stimulus measures.
As part of “restructuring,” the government is pushing ahead with measures to reduce its control of the giant state-owned enterprises that dominate much of the economy. It also plans to further open the country’s financial system. This is certain to intensify conflicts within the ruling elite. Significant economic and political power brokers, resting on state-owned enterprises, are the target of a corruption purge led by President Xi Jinping.
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