- Feng Li/Getty Images
- China says it will lower its growth target for gross domestic product from a hard 6.5% to a more flexible range of 6% to 6.5%.
- The move is significant, and it reflects worries domestically about the longer-term impact of the trade battle with the US.
- “Economic and trade frictions … had an adverse effect on the production and business operations of some companies,” Premier Li Keqiang said.
China’s central government on Tuesday said it would lower its growth target for gross domestic product, the latest sign that the world’s second-biggest economy is in the grips of a major slowdown.
In a rare acknowledgment of weakness from the Chinese state, Premier Li Keqiang said the trade war with the United States, which has seen the two countries swap tit-for-tat tariffs on a combined $360 billion worth of goods, was having a material negative impact on the economy.
“What we faced was profound change in our external environment,” Li said at the opening of China’s National People’s Congress, as reported by several news outlets.
He added that China-US economic and trade frictions “had an adverse effect on the production and business operations of some companies and on market expectations.”
Those external factors, Li said, have led the central government to decide on a somewhat softer and lower growth target for the country. The previous economic-growth target of 6.5% annually will now be replaced by an ambition to grow China’s GDP by 6% to 6.5% a year.
“Instability and uncertainty are visibly increasing and externally-generated risks are on the rise,” Li continued.
“Downward pressure on the Chinese economy continues to increase, growth in consumption is slowing, and growth in effective investment lacks momentum.”
Li’s comments come, somewhat counterintuitively, as Beijing and Washington look to be close to securing a deal on trade after weeks of negotiations between senior figures in both nations.
Chinese officials are said to have offered to trim tariffs and other restrictions including on US farm, chemical, and auto products. Washington, in return, is weighing removing at least most tariffs on Chinese products.
The acknowledgment that growth is struggling in the face of external pressure is an important one. Beijing is generally hugely reluctant to acknowledge economic weakness, and Li’s words on Tuesday suggest the true gravity of the situation in an economy that not only faces external headwinds from the trade war but is also grappling with major internal issues.
China sits on an enormous pile of debt, with fears also building that a significant amount of domestically focused companies are too highly leveraged and are at the risk of default.
The downward revision of growth targets in China comes amid indicators that many wealth Chinese are beginning to fear for the country’s economic future.
According to Hurun Report, a Shanghai-based research firm, just over one-third of the superrich Chinese citizens in a survey described themselves as “very confident” about the future of the economy.
The number is startling when compared with the same survey two years ago, which found that nearly two-thirds were very confident. It was the lowest number in the survey’s 15-year history, Hurun said.