Premier Li Keqiang, speaking at the March 5 opening of the annual session of the National People's Congress, China's parliament, announced a goal of 6.5-7% real economic growth for 2016.
China's rate of expansion fell below 7% last year, so it makes sense for the nation's leadership to seek a soft landing. Beijing is aiming for "medium to high growth" of 6.5% or more -- a target also incorporated in its new five-year plan (for 2016-2020), which was made public at the session.
Still, it is a cause for concern that the authorities seem to have little sense of urgency regarding China's slowdown, which has sent the global economy reeling.
One reason has to do with internal affairs. Under the country's system of governance, the Communist Party calls the shots. The party is now in the midst of a sweeping anti-corruption campaign championed by President Xi Jinping. Central and local government officials handling the day-to-day administration of economic policies appear to be waiting out the storm, believing it wisest to keep their heads down both in public and in private to lessen the risk of being targeted by graft probes. Although Li's government has criticized many "lazy" officials who failed to push ahead with policy directives, the situation has yet to improve.
This bureaucratic inertia makes it difficult even for already-funded projects to make headway. Under such circumstances, the economy naturally cannot perform well. China's leadership should take effective measures to eliminate this bottleneck as soon as possible.
ZOMBIE COMPANIES The government has declared it will focus on supply-side reform as part of structural adjustments. This means the authorities are now serious about drastically weeding out "zombie companies," or chronically unprofitable, typically state-owned enterprises that are kept afloat by constant bailouts and are to blame for serious overproduction in industrial sectors such as coal and steel. The restructuring process is expected to result in millions of job losses, which could put further pressure on the economy. It is extremely important to address this.
China's defense budget for 2016 is up 7.6% from last year and at an all-time high. Even though the growth rate dipped below 10% for the first time in six years, it still outstripped economic growth, suggesting that military spending remains a sacred cow. China, whose defense budget is now more than three times as large as Japan's, should listen to concerns voiced by neighboring countries over its military buildup.
The government has committed to creating a "moderately prosperous society" by 2020, by doubling gross domestic product and per capita income from 2010 levels. The goal can be achieved if annual growth of more than 6.5% is maintained.
The path to this target is not easy. The challenges ahead are to carry out structural reforms to ensure medium- to long-term growth, take timely measures to prevent economic activity from losing steam, and make sure the growth is stable. China's leadership under Xi should show initiative by exploring all possible ways to achieve its goal.