According to the Chinese Prime Minister Li Keqiang, China is ready to stimulate the economy and boost the market confidence. In a speech on Sunday the Prime Minister said, “China will struggle to meet the annual growth target of 7 percent this year.”
In his press conference in the Beijing Great Hall Mr. Li said, Chinese economy is growing at its slowest pace for a quarter of a century till last year. The market experts in China welcomed the pledge by the government.
It was previously reported that the government lowered its growth target for gross domestic product from last year’s goal of 7.5 percent after a 7.4 percent expansion in 2014. In his speech Mr. Li said, “It is true we have adjusted down somewhat our GDP target, but it will by no means be easy for us to reach this target”. He then added, “China’s economy has already exceeded $10tn so a 7 per cent increase is equivalent to the entire economy of a medium-sized country”.
According to the market experts, investors in China are also worried about the collapse in the Chinese property sector and the huge accumulation of debt in the recent years. According to the Chinese government data the debt reached 228 percent of the GDP in the middle of last year. According to the business analysts the most worrying part is the speed at which it has grown. According to the market data the total debt quadrupled in seven years to around $28 trillion from $7 trillion on 2007.
Mr. Li also assured that he has several policies in place to stop the widespread unemployment and drop in income. In the recent months the Chinese state officials are suggesting that, a “new normal” of slower growth is desirable to stop the economy form depending on debt-financed investment. In his press conference Mr. Li said, “Under this ‘new normal’ state we need to ensure that China’s economy operates within a proper range. If our growth speed comes close to the lower limit of its proper range and affects the employment and increase of people’s incomes, we are prepared to step up targeted macroeconomic regulation to boost market confidence”.
But Mr. Li didn’t specify the “lower limit” and elaborate what kind of measured target would take place. Mr. Li also mentioned about the new job data regardless of slower economic growth. He said, “The good news is that in the past couple of years we did not resort to massive stimulus measures for economic growth. That has made it possible for us to have fairly ample room to exercise macroeconomic regulation”.
