After ‘deal in principle’ agreement with the United States, China has decided to go for economic stability in the year 2020 with achieving its proposed lower annual growth of 6 per cent. The Chinese news agency Xinhua reports that top policy-makers and officials have agreed upon to target 6 per cent of annual growth this year from 6.5 per cent of current rate to prevent the slowdown in world’s second-largest economy. The decision was taken in the Central Economic Work Conference, a closed-door gathering of top leaders.
The proposed target, taken in a closed-door meeting, will be announced at China’s annual parliamentary session in early March 2020. At the end of the meeting, President Xi Jinping and other Chinese leaders promised more fiscal and monetary measures in coming year to ensure stable growth rate, supporting everything from consumption to infrastructure investment and employment in 2020.
The global economic slowdown has created downward pressure on China’s economy. In the third quarter of this year, China’s economy touched near 30-year low point of 6% and further degradation is expected in the last quarter of the year. However, calculating whole year of performance, the economy is expected to achieve the defined target of 6 to 6.5 per cent.
Xinhua media report says that the priority has been placed on quality and effectiveness of fiscal policy to keep the economic policies stable and strengthening them to achieve proposed growth targets in 2020. The economic plan aims at countering a protracted domestic slowdown that has seen lowest growth in decades and signals the continued effort this year to support the economy.
‘To achieve the expected target for next year, we should prioritize stability. Macro policies will be stable, micro policies will be flexible, underpinned by social policies,” Xinhua reported after the meeting of Central Economic Work Conference.
Preventing the financial risk and keeping the debt-to-GDP ratio stable was assigned the most priority for 2020 by the officials at the meeting. The officials agreed to have “contingency plans” to sustain in growing global economic slowdown. But, smaller firms and banks are the most vulnerable part of the economy which faces more pressure and gets more affected of economic slowdown. As the economy has experienced slow capital investment and bonds payment-failure, small firms will continue to face big pressure next year, and that could affect the financial sector.
Chinese Media points out that the government needs to work out on two fronts on urgent basis. The first point is counter-cyclical policy adjustments and the reform to support the small business. China would stabilize and expand the use of foreign capital and keep foreign trade growth steady, the agency reports. China economists believe that the government will roll out slightly more-aggressive stimulus measures next year with new policies that allow local governments to borrow and build.
The government has launched many preventive measures like reductions in reserve requirements for banks, tax cuts and spending more infrastructures along with allowing localities to issue 2.15 trillion yuan in special bonds and lending rates to boost credit. But these measures have not been proved fruitful yet to stop the slowdown.
As the first phase of the trade deal with the United States ‘deals in principle’ has been agreed by both sides to reduce some US tariffs, Chinese exporters have got some sense of relief. However, this is not enough for such largest economy, policymakers need to formulate ways to boost demand in the market.