In the annual state-of-the-nation speech on March 5, the Chinese Premier told the 3,000 delegates present that further economic slowdown can be expected this year. The country’s GDP growth target has thus been reduced to approximately seven percent as a result of deflation and rising deficit.
It is vital for China to pay greater focus to the strategy that caused its exponential economic growth in the first place
During the speech, which lasted over an hour and a half, Li expressed the importance of maintaining “medium-high-level growth” and creating new growth drivers. Areas of improvement that were pledged included the labour market, the ease of doing business for new enterprises and living standards – particularly in rural areas.
“China’s economic development has entered a new normal. Systemic, institutional and structural problems have become ‘tigers in the road,’ holding up development. Without deepening reform and making economic structural adjustments, we will have a difficult time sustaining steady and sound development,” Li told the Chinese parliament.
Last year China’s GDP grew by 7.4 percent, signalling a continuing pattern of falling steadily since 2010. The country’s shift to a market-based economy in 1978 initiated its rapid expansion, which averaged around 10 percent GDP growth per year. According to the World Bank, this incredible feat lifted over 500 million people out of poverty.
A series of large infrastructure projects were also unveiled by Li during his address, including investing $128bn into the railway sector and promoting the railway construction industry in overseas markets. Yet economists have warned against the economy’s current reliance on infrastructure construction due to its inherent lack of sustainability. As such, it is vital for China to pay greater focus to the strategy that caused its exponential economic growth in the first place, namely the implementation of market forces.