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A screen shows China's Premier Li Keqiang delivering a government work report during the opening session of the National People's Congress in Beijing on Sunday. (Photo by Akira Kodaka)

China vows to build 'new type' of global relations

Premier's speech a renunciation of economic nationalism under Trump

MARIKO TAI, Nikkei staff writer | China

BEIJING -- Chinese Premier Li Keqiang said on Sunday that his country intends to be a leader in building a "new type" of international relations, while attacking the rise of economic protectionism in a pointed criticism of U.S. President Donald Trump.

"There are many uncertainties about the direction of the major economies' policies and their spillover effects," Li said during his opening remarks at the annual general session of the National People's Congress.

Li added that his country would "oppose protectionism in its different forms," and lamented the emerging trend against international trade elsewhere in the world, in comments clearly directed toward the Trump administration's bellicose criticisms of China's economic policies.

Before and after his election last November, Trump pledged an "America First" economic policy, threatening the imposition of heavy tariffs on Chinese imports and raising tensions between the two countries.

As the U.S. flirts with an inward turn, Li claimed that China had been "playing a constructive role in international and regional issues and has made significant contribution to world peace and development," in an apparent reference to the transport networks being constructed across central Asia under the One Belt, One Road initiative.

"China is ready to join hands with the international community and build a new type of international relations," Li said.

Sunday's congress offered other insights into Beijing's renewed wariness of developments in the U.S. since Trump took office. The day before Li's speech, China announced a 7% expansion in military spending from the previous year to exceed 1 trillion yuan ($145 billion) for the first time. This followed Trump's pledge of a 10%, $54 billion increase in the U.S. defense budget a few days earlier.

On domestic policy, Li gave top priority to tackling excess industry capacity. Though similar pledges have been made by Beijing in the past, Li said there remained "problems of laws and regulations being enforced in a non-standard, unfair, or uncivil way," which had hindered earlier reform attempts.

While acknowledging the issue "poses a serious challenge in some industries," Li promised to cut capacity of steel by 50 million tons and coal by at least 150 million tons this year.

Analysts have expressed skepticism at the targets. Marie Diron, associate managing director at Moody's Investors Service, noted that Li's report "does not contain the details of implementable policies" in reducing output.

Li also acknowledged concerns about China's national debt, which has grown dramatically after stimulus policies were introduced in the wake of the 2008 economic crisis.

China has set the fiscal deficit to increase by 200 billion yuan to 2.38 trillion yuan, accounting for 3% of gross domestic product in 2017. Li said that the increase was intended "to allow for further reductions in taxes and fees," promising to cut tax by around 350 billion yuan and decrease business related fees by 200 billion yuan.

Additional fiscal stimulus is being introduced to prop up China's further slowing economy. Last year, GDP grew 6.7%, its slowest pace since 1990. For this year, Li sets target to be "around 6.5% or higher if possible," lower than last year's target of 6.5% to 7%.

Diron of Moody's estimated that China's growth potential was lower than the 6.5% benchmark, adding that fiscal policy was "likely continue to be expansive, in line with the proactive fiscal policy stance."

The growth target also carries political weight, as the as five-yearly National Congress of the ruling Communist Party is scheduled for the fall. Li said achieving 6.5% growth "should enable us to pave the way for the 19th National Party Congress."

As number two in the party hierarchy, Li took the time to express his loyalty to President Xi Jinping during his hour and 40 minute speech. He said six times that the country follows the "core" -- a title conferred upon Xi last year to indicate his commanding position in the party, after sidelining his political rivals.

Growing discontent

While Chinese policymakers have been paying keen attention to Xi's consolidation of power, the country's political elite are giving renewed attention to social issues causing discontent elsewhere in the country.

Li acknowledged this Sunday, telling his audience that "civil discontent still remains not insignificant," particularly in relation to housing, education, medical and aged care, food and drug security, income inequality and the environment.

"Environmental pollution remains grave, and in particular, some areas are frequently hit by heavy smog," he said, adding that the government needed to further strengthen ongoing efforts to combat pollution.

Environmental concerns, and China's notorious smog problem, both remain big issues across many cities in the country, while the government's purported campaign against air pollution has not delivered any noticeable smog reduction in the eyes of urban residents.

In January, China's Meteorological Administration has reportedly ordered local authorities to stop providing air quality forecasts, claiming that regional differences prevented an assessment of air quality standards. The move was met with a public outcry, with claims the government was attempting to cover up the smog issue.

"If the central government will issue their own standard, those forecasts are all going to be lies," one wrote on China's microblogging site Weibo.

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