China sets 2012 growth target at 7.5 percent

Updated: 2012-03-05 10:08

(Xinhua/Agencies)

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BEIJING - China aims to grow its economy by 7.5 percent in 2012 by following proactive fiscal and prudent monetary policies to combat downward pressure on growth and still high inflation, Premier Wen Jiabao said on Monday.

China sets 2012 growth target at 7.5 percent

Chinese Premier Wen Jiabao delivers the government work report to the annual session of the National People's Congress (NPC) at the Great Hall of the People in Beijing Mar 5, 2012. [Photo/people.com.cn]

The growth target, revealed at the start of China's annual parliamentary meeting, was in line with analyst expectations and lower than the longstanding annual goal of 8 percent.

"We aim to promote steady and robust economic development, keep prices stable, and guard against financial risks by keeping the total money and credit supply at an appropriate level, and taking a cautious and flexible approach," Wen said in his annual work report to the National People's Congress (NPC).

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Wen set a target for inflation at about 4 percent for the year, in line with the target set in 2011, saying that the government would work to prevent a rebound in prices in 2012. Inflation remained stubbornly above official targets in every month of last year.

Wen also pledged to curb speculative demand in the property market, and said the yuan would be kept "basically stable" with strengthened two-way flexibility.

He highlighted that the government would take action to solve the local government debt problem, regarded by many investors as the key risk to fiscal sustainability with about 10.7 trillion yuan ($1.7 trillion) owed by local governments, according to government figures at the end of 2010.

"We will strengthen supervision of local government debt and guard against risks. We will further investigate and regulate financing companies run by local governments," Wen said.  

Reform of financial systems

China will deepen the reform of its financial systems by improving services for small and micro businesses, and making renminbi convertible under capital accounts, said Wen.

The country will ensure orderly development of small financial institutions, and improve the systems and mechanisms that serve small and micro businesses as well as agriculture, rural areas and farmers, said the premier.

"We will work steadily to make the RMB convertible under capital accounts and expand the use of RMB in cross-border trade and investment."

The government will also improve both initial public offerings and delistings, and ensure better protection of returns on investors' money and their rights and interests, Premier Wen told the lawmakers.

He vowed to break up monopolies and relax restrictions on market access, encourage nongovernmental investment in infrastructure, finance, education, and medical care, and create a fair environment in which economic entities under all forms of ownership can compete and develop together.

Difficulties and challenges

The premier admitted China still faces many difficulties and challenges internationally and domestically in economic and social development.

"We are keenly aware of that," Wen said, describing the global economic recovery as "tortuous", as the global financial crisis is still evolving, and the sovereign debt crisis in some countries will not ease any time soon.

Major developed economies lack impetus for growth and their unemployment rate remains high, while emerging economies face the dual pressures of inflation and slowing economic growth, he said.

He warned of sharp fluctuations in the exchange rates of major currencies and the prices of important commodities, as well as mounting protectionism in international trade and investment.

Domestically, he said, it has become more urgent and more difficult to solve institutional and structural problems and alleviate the problem of unbalanced, uncoordinated, and unsustainable development.

"China's economy is encountering new problems," Wen said, citing downward pressure on economic growth as well as high prices in the world's second-largest economy.

Wen vowed to coordinate efforts to achieve steady growth, control prices, adjust the economic structure, improve the people's well-being, implement reform, and promote harmony.

"China's macro economy faces a lot of uncertainties this year, particularly from overseas markets," said Zhuang Jian, an economist with the Asian Development Bank. "External demand looks weak and its strength to drive the Chinese economy will be quite weak, too."

Zhuang said the macro control over the real estate market will remain one challenge China has to properly handle in 2012.

"There are quite a lot of debates over property tightening policy in the society right now," he said, adding the property market has a significant impact on China's economy.

Further, he said the government must help small and micro enterprises survive the difficult business environment amid shrinking overseas orders and rising costs.

"All the difficulties and challenges will create pressure of restructuring for China's economy," Zhuang added.

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