China cuts GDP growth to 5.5% to target slower growth amid headwinds

China on Saturday cut its GDP target to 5.5 per cent to focus on slower growth to stabilise its economic fundamentals this year, as the world's second-largest economy beefed up supportive measures to shore up growth against strong headwinds.

In his annual work report submitted to the opening session of the National People's Congress, (NPC), the country's parliament, Chinese Premier Li Keqiang announced the lowering of the GDP target from six per cent to 5.5 per cent amid uncertain global recovery due to COVID-19 and Ukraine turmoil as well slump in China's vast property sector rising concerns of its impact on the economy.

In 2021, China's economy grew by 8.1 per cent to about USD 18 trillion- stated to be the best in a decade.

The pace of the growth was well above the government target of above six per cent in 2021.

In his work report, Li said China plans to create more than 11 million new jobs in 2022.

The government has set the deficit-to-GDP ratio for 2022 at around 2.8 per cent in a move to boost fiscal sustainability, while the special-purpose bonds for local government will total 3.65 trillion yuan (USD one trillion).

The fundamentals of China's economy remain unchanged, and they will maintain long-term growth, he said.

"We must make economic stability our top priority," Li said in an apparent explanation for lowering the GDP target.

"The world economic recovery lacks drive, and commodity prices remain high and are prone to fluctuation. All of this is making our external environment increasingly volatile, grave and uncertain," Li said.

The exchange rate of the yuan will be maintained generally stable at an adaptive, balanced level, he added.

He also announced a new package of tax refunds and cuts this year to support enterprises, including a temporary exemption on value-added tax payments to small taxpayers.

With over 10 million college graduates expected to enter the job market this year, Li said that the government will provide them with stronger policy support and uninterrupted services to ensure that they can find jobs or start businesses.

Commenting on Li's budget announcement, Zhang Zhiwei, chief economist at Pinpoint Asset Management said, I think it will be a challenging year for the government to achieve this growth target.

The housing sector is slowing down, and the COVID-19 pandemic has constrained the service sector severely, Zhang told the Hong Kong-based South China Morning Post.

It is not clear how much infrastructure investment can grow in 2022 to offset such adverse effects, he said.

Premier Li also acknowledged the difficulty, saying it will take hard effort to achieve such targets. He did not give similar comments last year, the Post report said.