China to target around 6% growth in 2020, step up state spending

A trade deal with the US could ease pressure on exporters but more policy steps are needed to counter weak demand at home and abroad. (AP)
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Updated 14 December 2019

China to target around 6% growth in 2020, step up state spending

  • The central bank is concerned to avoid fanning property speculation and inflation expectations

BEIJING: China plans to set a lower economic growth target of around 6 percent in 2020 from this year’s 6-6.5 percent, relying on increased state infrastructure spending to ward off a sharper slowdown, policy sources said.

Chinese leaders are trying to support growth to limit job losses that could affect social stability, but are facing pressure to tackle debt risks caused by pump-priming policies.

The proposed target, to be unveiled at China’s annual parliamentary session in early March 2020, was endorsed by leaders at the annual closed-door Central Economic Work Conference this month, according to three sources with knowledge of the meeting’s outcome.

“We aim to keep next year’s growth within a reasonable range, or around 6 percent,” said a source who requested anonymity.

Top leaders pledged to keep economic policies stable while making them more effective to achieve growth targets in 2020, state media said on Thursday.

Next year will be crucial for the ruling party to fulfill its goal of doubling gross domestic product (GDP) and incomes in the decade to 2020. Economic growth of nearly 6 percent next year could be enough to meet that goal, given the economy is expected to expand by about 6.2 percent this year, policy insiders said.

Officials at the National Development and Reform Commission and the Ministry of Finance were not immediately available for comment on Saturday.

The government aims to boost infrastructure investment by allowing local governments to issue more special bonds next year, but there is less room for tax cuts, the sources said.

The annual budget deficit could rise from this year’s 2.8 percent of GDP, but is likely to be kept within 3 percent, they said.

Local governments could be allowed to issue special bonds worth some 3 trillion yuan ($426.20 billion) in 2020 to fund infrastructure projects, including 1 trillion yuan front-loaded to this year, they said.

“Fiscal policy will provide a key support for the economy,” said one source.

The central bank may ease policy further to encourage lending and lower corporate funding costs, but it wants to avoid fanning property speculation and inflation expectations after consumer inflation hit a near eight-year high in November, the sources said.

Beijing has unveiled a raft of pro-growth measures this year, cutting taxes and fees and letting localities issue 2.15 trillion yuan in special bonds, alongside cuts in reserve requirements and lending rates to boost credit.

But top leaders have ruled out aggressive stimulus for fear of pushing up debt levels.

A trade deal with the US could ease pressure on Chinese exporters, but more policy steps are needed to counter weak demand at home and abroad, policy insiders said.

The US and China cooled their trade war on Friday, announcing an agreement that reduces some US tariffs in exchange for what US officials said would be more Chinese purchases of American farm products and other goods.

Leaders at the meeting listed preventing financial risks as a key priority for 2020 and called for keeping the debt-to-GDP ratio largely stable.

They also pledged to prepare “contingency plans” to cope with growing global volatility and risks.

But any sharper slowdown could put more pressure on small firms, which could in turn hit smaller banks — the most vulnerable part of the banking sector, policy insiders said.

Private companies have defaulted on bond payments at a record rate this year, while capital investment has slowed. A rare state seizure of a regional bank earlier this year and state rescues of lenders have also sharpened concerns about the health of small banks.

“Small firms will continue to face big pressure next year, and that could affect the financial sector,” said one insider.

‘Dubai will be my new Beirut,’ say grieving Lebanese workers

Updated 22 min ago

‘Dubai will be my new Beirut,’ say grieving Lebanese workers

  • About 350,000 Lebanese now live and work in the six Gulf nations

DUBAI: Just days after the enormous blast that shattered Beirut, Ali Hammoud found himself looking down on the rubble from an airplane window, leaving behind his family and hometown.

Born and raised in Lebanon’s capital, the 30-year-old IT engineer finally decided to head for Dubai after the explosion destroyed his last hopes of ever seeing Beirut prosper.

“It’s not easy at all, but I had to finally leave. I feel I’ve betrayed the city I love to death, but there is nothing left for me there except depression,” Hammoud said after arriving in the Gulf emirate.

“Now I can start a professional career, live in peace and send money back to my family,” said Hammoud, who had spent a year looking in vain for work before the Aug. 4 disaster that left more than 170 people dead and compounded Lebanon’s financial crisis.

Like many of his compatriots longing for safety and stability, the young man has applied for a job in Dubai. He joins tens of thousands of Lebanese who helped build a glitzy city that reminds them of their parents’ tales of the glamor of old Beirut — but with glimmering skyscrapers instead of Ottoman-era and French colonial villas.

Last week’s explosion of a long-neglected stock of ammonium nitrate at Beirut’s port ripped through the vibrant coastal city known for its rich history as well as legendary nightlife and cuisine.

The fact that Lebanese officials had long tolerated a ticking time-bomb in the heart of the Mediterranean city has served as proof to many of the rot at the core of the state apparatus.

“My aim is to overcome the guilt of leaving,” said Hammoud. “Dubai will be my new Beirut.”

Long before the explosion, Lebanon was heading downhill fast. The country was mired in its worst economic crisis since the 1975-1990 civil war, with runaway inflation and bank capital controls fueling angry street protests.

Political life in the country has been dominated for three decades by former warlords who exchanged their military fatigues for suits.

Among Sunni Muslim, Christian and myriad other groups, the most powerful force is the Shiite Hezbollah movement.

After years of systematic corruption, unsolved assassination cases, wars with neighboring Israel, and lack of basic services, many Lebanese now see the country’s elite as fighting over the spoils. They are viewed as beholden to their personal and sectarian interests, rather than the good of the nation of 6 million.

“I can’t explain how frustrated I am. I had to leave my country years ago because of those warlords. They stole from us and now they kill us?” said Firas Rachid, a 31-year-old salesman who has lived in Dubai since 2016.

Beirut, once famous for top educational and medical establishments, has lost much of its pre-civil war identity and its reputation as an oasis of enlightenment.

Millions of Lebanese, from doctors to engineers, to teachers and other professions, have emigrated over the years, seeking a better life in the Gulf and beyond.

About 350,000 Lebanese now live and work in the six Gulf nations, more than 100,000 of them in the United Arab Emirates alone, mostly in Dubai.

“Why Dubai? We drive in lanes here, we don’t fear militiamen holding guns to our heads, we have basic services, and we get paid well,” said Rachid. “My parents always describe Beirut as a hub for the region in the ‘60s and ‘70s, but this is exactly what Dubai is now.”

In his book “My Story,” Dubai’s ruler Sheikh Mohammed Bin Rashid Al Maktoum recalls his first visit to Beirut, years before the civil war that brought the “Paris of the Middle East” to its knees.

“In the early 1960s, its streets were clean, neighborhoods beautiful, its markets modern. It was a source of inspiration for me. I had a dream for Dubai to become like Beirut some day,” he wrote.

Decades later, Dubai has become a magnet for millions of Arabs whose countries have been ravaged by poverty and conflict.

Jordanians, Palestinians, Moroccans and others have opted to build their future in the desert city.

It does not have the history or cultural heritage of their homelands, but for many it is a fair tradeoff for peace and financial security.

At a basketball game in Dubai last year between two Lebanese clubs with different sectarian ties, there was no violence, no sectarian chants, only the slogan: “Three, two one! We are one!“