In his final speech to his country’s representatives, outgoing Chinese premier Wen Jiabao has given no benedictions nor made final demands other than more of the same: to urge his compatriots to build a “moderately prosperous society” in the world’s second-largest economy.
Mr. Wen’s dry, 100-minute address to the National People’s Congress, the annual meeting of the country’s rubber-stamp parliamentary body, left even the stock markets largely unmoved, the Hong Kong and Shanghai indices edging upward after days of losses.
The country plans to boost spending to reach a 7.5 per cent GDP growth target this year, will raise China’s fiscal deficit to about 2 per cent of GDP or 1.2 trillion yuan ($192.8-billion), and limit inflation to around 3.5 per cent, down from last year’s 4 per cent. Among the other goals are opening 5,200 km in new railways, according to the National Development and Reform Commission, and expanding local governments’ bond issues to 350 billion yuan in 2013, up from 250 billion last year, despite growing concern about bad debt.
Mr. Wen also said the government should build consumer spending as a means of growth and promised to strengthen “adjustments” to the property market, suggesting restrictions on buying homes in major cities – designed to keep prices from spiraling – are likely to continue. He said the government will finish 4.7 million units of affordable housing this year and start another 6.3 million units.
“In the current stage, the role investment plays in promoting economic growth cannot be underestimated,” he told the congress of nearly 3,000 delegates, adding that controls for private investment should be relaxed.
“There are relatively big inflationary pressures this year, mainly because there are pressures on China’s land, labour, agricultural products and services. And major countries are stepping up loose monetary policy, so we can’t overlook imported inflationary pressures,” he said.
Maintaining economic and social stability is paramount for the transitioning leadership. Incoming president Xi Jinping is to have his position confirmed during the 13-day assembly while Mr. Wen will be succeeded by Li Keqiang, an English speaker who is already a familiar face to Western diplomats.
“Sustaining growth recovery will be the new leadership’s top priority, to be achieved via the continuation of relatively accommodative policy. Inflationary pressures should remain manageable given the modest pace of recovery. Reforms in fiscal and financial areas, as well as further deregulation in private sectors will be sped up,” wrote economists Qu Hongbin and Sun Junwei at HSBC.
What’s not yet clear is the fate of the country’s state-owned enterprises. Powerful but heavily bureaucratic, the government has long pledged to reform SOE-dominated industries to make them more competitive, and reforms are expected under the new administration of incoming president Xi Jinping. But how deep reforms can go given the companies’ political connections remains in question.
Still, despite Mr. Wen’s dry sendoff, there are hopes that the incoming leadership team will continue efforts to appear fresh and new.
“The new leadership has tried to give at least the impression of fresh energy since taking over the key posts in the Party late last year – for example through calls for greater frugality and an anticorruption campaign. Accordingly, while wholesale policy changes are unlikely, the leadership may want to flesh out more of the details of their priorities in order to maintain the positive momentum of the last three months,” wrote Mark Williams and Wang Qinwei at Capital Economics of what to expect from the Congress.
Later this week the country will also release key numbers for inflation and trade in January and February, combining the two to help compensate for seasonal distortions from Chinese New Year, which fell in late January last year and mid-February this year.