The Chinese government dropped setting economic growth target for the first time and placed job creation as top priority as coronavirus, or Covid-19, pandemic has ravaged the outlook.
At the annual session of the National People's Congress in Beijing, Premier Li Keqiang said the country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment.
The novel coronavirus, or Covid-19, pandemic was first detected in the Chinese city of Wuhan late December. Since then, the virus that causes severe respiratory illness has spread to almost every corner of the planet claiming thousands of lives and forcing several countries go into lockdown, pushing the global economy into its worst recession in many decades.
By April, many countries have eased the lockdown restrictions, but containment measures such as social distancing and wearing protective masks are set to remain until a preventive vaccine is developed.
In 2019, the Chinese government had targeted 6-6.5 percent growth and the actual growth was 6.1 percent, the weakest since 1990.
According to an official work report, the government aims to add over 9 million jobs and target the urban unemployment rate at around 6 percent.
The government expects the budget deficit to widen to more than 3.6 percent of GDP from 2.8 percent targeted last year, and plans to issue CNY 1 trillion of government bonds for controlling Covid-19. The report did not provide an upper limit for the budget deficit, Iris Pang at ING said. So it seems the government wants to be flexible on the stimulus amount, the economist added.
The annual budget points to fiscal stimulus this year at least on par with that following the global financial crisis and while monetary policy is likely to remain more constrained than in 2009, the NPC did signal further rate declines and faster credit growth, Julian Evans-Pritchard, an economist at Capital Economics, said.
The work report said the monetary policy will be more flexible and the country will use a variety of tools including reserve requirement ratio cuts and interest rate reductions to enable M2 money supply and aggregate financing to rise at higher rates this year.
The target for consumer price inflation was set at around 3.5 percent.
In order to reduce the corporate burden, the government will cut tax and fees for companies by over CNY 2.5 trillion.
Big commercial banks should increase their lending to small firms by more than 40 percent this year. Further, SMEs were allowed to delay their loan payment and interest by nine months.
Li said China will work with the U.S. to implement the 'phase one' trade deal.
Defence spending is set to increase at a slower pace of 6.6 percent this year.