Caixin
Mar 10, 2015 07:09 PM

Gov't Must Meet GDP Goal to Create Enough Jobs, Researchers Say

(Beijing) – The government will have to work hard to meet its goal for GDP expansion this year to create enough jobs, two researchers say.

In a report he gave at the opening of the annual session of the legislature on March 5, Premier Li Keqiang said the government wants GDP growth of "around 7 percent" this year. Last year's target was 7.5 percent, but the economy only grew by 7.4 percent, the lowest rate in 24 years.

This year's target is based on "a consideration of needs and possibilities" amid bigger challenges the country will face this year, Li said. It is also in line with the plan to build a society that is generally well-off, the premier said, and reflected a balance between growth and restructuring.

China's leaders have said they want to transform the economy from one based on low-end manufacturing to one that adds more value to products and is known for innovation.

Niu Li, the director of the macro-economy projection department at the State Information Center, said growth may fall short of the target in one or two quarters, but the government must make sure the goal for the year is met. "After all, it's a key benchmark" for job creation, Niu said.

Xiang Dong, who leads the cabinet's research office, told The Beijing News that the 7 percent figure was chosen because it would ensure enough jobs are created.

To meet it target for economic growth, the central government has also laid out specific targets for fixed-asset investment and sales of retail goods.

It has also planned for a budget deficit of up to 1.62 trillion yuan for the year, 270 billion yuan more than last year. Some 500 billion yuan of that will go toward provincial-level spending.

Xu Shaoshi, director of National Development and Reform Commission (NDRC), the top economic planner, said on the sidelines of the legislative meeting that public spending this year should be directed at infrastructure projects such as roads and railroads; the redevelopment of slum areas; upgrades of urban drainage systems; and irrigation networks in rural areas.

Considering overcapacity in manufacturing and a slowdown in the real estate market, Niu said that spending on infrastructure would be central to maintaining economic growth. However, he cast doubt over official efforts to reach out to private investors because laws to protect them and their money fall short.

The central government has said it wants private investors to play a bigger role in the economy, for example by putting their money into toll highways or the railroad network.

This public-private partnership (PPP) model has become something of a buzzword in China's economic circles in recent years as the period of rapid expansion of the economy draws to a close.

Despite this buzz, progress to get the model up and running has been slow. The NDRC rolled out 80 pilot PPP projects at the end of May last year, but only 49 got backing from private investors. Interest from the private sector in similar projects run by regional governments has been even weaker.

It is unrealistic to expect private investors to put their money into projects that require two to three decades to turn a profit without legal safeguards, Niu said. "People should not have expectations that are too high regarding how the PPP model can help the economy," he said.

Underscoring the headwinds the economy is facing, the president of State Grid Corp., Liu Zhenya, said during the meeting of the government's top political advisory body that power consumption in the first two months of the year grew by less than 2 percent compared to the same period in 2014. The figure for all of last year was 3.8 percent, the lowest since 2000.

(Rewritten by Li Rongde)

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