China announces “a battle” to defend its growth

La Chine annonce «une bataille» pour défendre sa croissance

Photo: Dale De La Rey Agence France-Presse
“The economy, both national and international has pushed our development in an environment of great hardness and complexity,” admitted the head of the chinese government.

Referred to by the trade sanctions of the United States, China expressed its readiness on Tuesday to “battle” to defend its economic growth, fell last year to its lowest level for 28 years.

Speaking at the opening of the annual session of the Parliament, the prime minister Li Keqiang announced a series of stimulus measures in response to expected growth in slight decline this year. The chinese GDP will grow between 6 % and 6.5% in 2019, in a very slight decline compared to the score achieved in 2018 (6,6 %), reported Mr. Li to the nearly 3,000 deputies to the national people’s Assembly, gathered until march 15, in the imposing frame of the Palace of the people in Beijing.

“The economy, both national and international has pushed our development in an environment of great hardness and complexity,” admitted the head of government, while the United States imposed tariffs punitive damages of hundreds of billions of dollars of chinese products. “We need to arm ourselves to fight a battle more bitter,” he warned, as to echo president Xi Jinping, who has warned in late January the executives of the chinese communist Party (CCP) against the ” unforeseen risks that could arise in the economic field “.

The chinese president, who had received just one year of lifting the limit of two presidential terms, appears this time to be confronted by challenges inside as well as outside, forcing his regime to further support the economy. The increase in the deficit “addresses the need to provide a margin of political manoeuvre sufficient to control likely hazards that may arise in time to come,” admitted Tuesday, his prime minister.

Economic conditions, both national and international has pushed our development in an environment of great hardness and complexity

— Li Keqiang

 

The budget presented provides for a decrease of 2,000 billion yuan (about 390 billion CDN$, or about 2 % of GDP) taxes and social charges on companies. In total, the budget of the State and local authorities to 2019 is reflected by a slight increase of 0.2 point in the budget deficit to 2.8% of GDP.

Beijing must therefore limit its spending : the military budget will rise 7.5 % this year, an increase lower than that of last year (+8.1 per cent).

The government announcements have been well received on the stock markets : Shanghai has taken to 0.88 %, and Shenzhen, 2,28 %, even if the firm Capital Economics doubts that the chinese economy manages to adequately meet 6 % growth this year. If the trade war with the United States has hardly begun the dynamism of exports to the asian giant, the prospect of a confrontation sustainable with the America of Donald Trump weighs on the confidence of chinese companies and on the investment decisions. The activity is also hampered by the struggle of the power against the debt and the financial risks.

The authorities have thus ensured that there was no question of opting for a large stimulus as in the years that followed the financial crisis of 2008. Beijing “promises a dose of easing, but is reluctant to grant a strong rebound in the credit, even if this should lead to slower growth,” according to Capital Economics.

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