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China 2017 Growth Target Around 6.5%- Li Keqiang

China 2017 Growth Target Around 6.5%- Li Keqiang

David Cottle, Analyst


Talking Points

  • The Chinese Premier did as markets thought he would and said Beijing was aiming for growth of “around 6.5%” this year
  • This is even lower than the 6.7% notched up in 2016, but China needs time to reform, cut debt
  • Consumer price, deficit targets were also as expected

Premier Li Keqiang told the National People’s Congress in Beijing on Sunday that the government will target slower economic growth this year.

Gross Domestic Product rose by 6.7% in 2016, according to official figures. That was the smallest rise since 1990. However, Beijing will tolerate a slightly lower rate still in 2017 as it seeks to reform the economy and deal with a huge debt build-up. The administration is now aiming at growth of ‘around 6.5%’ this year Premier Li Keqiang said.

The Chinese government used substantial stimulus to keep the economy motoring at even last year’s relatively modest pace. Infrastructure investment soared, as did bank lending, despite repeated warnings about the country’s massive corporate debts. Li reportedly said that China will now take further steps to ensure financial-sector safety, including higher vigilance of the shadow-banking sector.

The government also unveiled plans aimed at ensuring every family has at least one wage-earner, even as jobs are cut in China’s traditional state-owned heavy industries. Beijing reportedly believes that 11 million new city-based jobs will be created in 2017, but that won’t be enough to employ the 15 million new workers whom the government believes will enter the labor market.

China will also target an annualized consumer price index rise of “around 3%” this year, while its budget-deficit target is 3% of GDP. All these benchmarks were broadly as expected by investors, and a Sunday-torpid foreign exchange market didn’t react much to Li’s words. Of course, it may mull them over anew when trading desks are more fully staffed on Monday.

The Australian Dollar is often the markets’ favorite liquid China proxy, but didn’t move far on this occasion. AUD/USD was steady around 0.75942 as Li spoke and afterward.

Sunday stuck: AUD/USD

Chart compiled using TradingView

Away from economics, Li also said that China would continue to resolutely oppose and contain independence activities in Hong Kong and Taiwan.

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.