China Slows The Tempo

Beijing reduces economic growth targets while ruling out “a deluge of stimulus”

- Cristina Lindblad

China needs to brace for a “tough economic battle ahead,” in the words of Premier Li Keqiang. It’s a struggle on two main fronts. President Trump is demanding that Beijing reduce support for stateowned companies or face continued tariffs. At home, the government must find a way to help struggling private companies without adding to China’s already enormous debt pile.

The plan to navigate those challenges was laid out in the presentation of the Report on the Work of Government, a ritual that marks the start of China’s 10-day-long legislative session. In his March 5 speech before the National People’s Congress, Li, China’s top economic official, gave himself and his boss, President Xi Jinping, some wiggle room by setting the official economic growth target for 2019 at a range of 6 percent to 6.5 percent, down from last year’s objective of about 6.5 percent.

Chinese policymakers’ acceptance of the economy’s inexorable slowdown—the lower bound of the target range would be the smallest expansion in almost three decades—was largely cheered by economists who warn anything faster would require excessive stimulus and jeopardize the country’s long-term financial stability. In days gone by, China’s leadership would’ve responded to economic headwinds with an all-out spending binge on roads, rail, and whatever else could keep growth humming above 10 percent. China will “refrain from using a deluge of stimulus policies,” Li said in his speech.