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.


Aramco chief sees demand for oil staying above 100m barrels

Updated 23 January 2020

Aramco chief sees demand for oil staying above 100m barrels

  • A panel on the global energy outlook at the WEF in Davos heard that renewable energy alone would not be able to meet rising demand for power as more people moved into the middle class
  • The panel also heard that coal, not oil, remained the biggest source of carbon emissions

DAVOS: Aramco CEO Amin Nasser said he expected global oil demand to stay above the 100 million barrels threshold as the rise of the global middle class spurred demand for energy.
A panel on the global energy outlook at the World Economic Forum in Davos heard that renewable energy alone would not be able to meet rising demand for power as more people moved into the middle class.
“There will be additional demand and the only way to meet it is if you continue to provide affordable, reliable and viable energy to the rest of the world,” said the Aramco CEO.
“There is good penetration from renewables and electric cars are picking up however you need to consider what is happening in the world. There are still an additional 2 billion people coming. There are currently 3 billion people using biomass, animal dung, kerosene for cooking and there are 1 billion people today without electricity and almost 50 percent of people have never flown in an aeroplane.”
The panel heard that coal, not oil, remained the biggest source of carbon emissions but that the location of many coal-fired power plants in developing Asian economies meant that reducing its impact was a major challenge.
“The number one source of emissions by far is the coal fire power plants – they alone are responsible for one third of emissions,” said International Energy Agency Executive Director Fatih Birol. “But they are in many cases the number one source of electricity generation in low income countries - so this is not a black and white issue.”