China’s Premier, Li Keqiang, has stated there will be no hard landing for China’s economy, as new economic reforms were adopted during the National People’s Congress. The country will target a growth rate of between 6.5 and seven percent per year until 2020.
Speaking at a news conference following the Congress, Li said supply-side reforms will create new growth drivers, and that not hitting growth targets would be “impossible”.
The five-year plan, adopted at the annual meeting of parliament, includes measures such as cutting high debt, streamlining state-owned enterprises and reforming financial markets. Li acknowledged while there would be job losses in state-owned industries, such as steel and coal, there will be no mass redundancies: “So long as we stay on the course of reform and opening up, China’s economy will not suffer a ‘hard landing’.”
The plan signals a shift in the direction of China’s economic policy, as it attempts to move away from export and investment-driven growth. By restructuring and reducing production at its costly state-owned industries, it plans to create more sustainable growth driven by domestic consumption.
While China’s state-owned industries flourished during the nation’s rapid growth period, many of these enterprises are now loss-making operations riddled with debt. The companies are commonly referred to as ‘zombie firms’, as they are unable to cover their own debt and so require substantial support from the government in order to remain open.
China’s growth fell to a 25-year low in 2015 and has been plagued by volatility recently, leaving policymakers struggling to stabilise the economy. Only days after it was introduced, China scrapped its stock market ‘circuit breaker’, a policy designed to temporarily shut down trading if the market lost value too quickly.