China sets 2021 growth target at above 6 %, shows post-COVID confidence

GDP Photo: VCG

China announced on Friday a growth target of over 6 percent for its economy for 2021, picking up the decades-long tradition of releasing a numeric goal after skipping it in 2020 due to the COVID-19 pandemic, showcasing top policymakers' solid confidence on the world's second-largest economy to sustain a robust recovery despite internal and external risks.

The growth target of over 6 percent is well below a widely accepted forecast of over 8 percent for the year. It would mean that the Chinese economy would once again lead the world in recovering from the impact of COVID-19, outpacing growth in many other major economies.

"In setting this target, we have taken into account the recovery of economic activity. A target of over 6 percent will enable all of us to devote full energy to promoting reform, innovation, and high-quality development," Premier Li Keqiang said in the Government Work Report that was delivered to the opening of the annual session of the National People's Congress, the country's top legislature, on Friday morning. 

The NPC session, which is held simultaneously with the annual meeting of the Chinese People's Political Consultative Conference (CPPCC) National Committee, known as the two sessions, is a window into China's policy priorities for the year. An official GDP growth target is among the most closely watched announcements.

Graphic: GT

At the two sessions last year, which were delayed for 78 days due to the COVID-19 outbreak, China skipped a specific numeric growth target for the first time in decades, as the country faced daunting uncertainty both at home and abroad. 

The world's second-largest economy recovered from a historic slump of 6.8 percent in the first quarter, to record a 2.3 percent growth for 2020, becoming the only major economy to grow. Another sign of China's recovery from the pandemic is that this year's two sessions convened at its conventional time frame.

"We achieved major strategic success in our response to COVID-19 and China was the world's only major economy to achieve growth," Li said, adding that the country also attained a complete victory in the fight against poverty. China has lifted nearly 100 million people out of extreme poverty.

"The growth target of above 6 percent is very reachable given the robust economic recovery… and would offer meaningful guidance for macroeconomic policies," Cao Heping, a professor of economics at Peking University in Beijing told the Global Times, adding that the Chinese economy could grow between 8 and10 percent in 2021.

Ahead of the Government Work Report, market expectations had predicted that a specific target might be skipped this year due to the current expectations of a high growth rate and other policy priorities, but Cao said that setting a GDP growth is a very effective way to coordinate policies and various priorities.

"There were discussions about whether or not a target should be set. But setting one is better, because it would ensure precision on the macroeconomic policy," he said, adding that given the economic outlook, other priorities, including a push for high-quality growth and lowering risk, would not be undermined.

Despite many risks in areas such as financial, housing and government debt, "development remains the top priority. And setting a target would not only guide policies but would also provide the easiest way to keep track on progress," Guan Tao, chief global economist at the Bank of China and a former senior official at the State Administration of Foreign Exchange, told the Global Times.

In the Government Work Report, Li also stressed the need to tackle various risks and challenges, vowing that China would maintain continuity, consistency and sustainability of macro policies and keep "prudent monetary policy flexible and targeted."

Also indicating macro policies returning to certain level of normalcy, China has cut deficit-to-GDP ratio target to around 3.2 percent for 2021 from around estimated 3.7 percent last year. Also, the country will no longer issue COVID-19 bonds.

The Government Work Report also set a slew of economic and social development goals for 2021, including creating 11 million new urban jobs, keeping CPI growth of around 3 percent and cutting energy consumption per unit of GDP by around 3 percent.

"In 2021, China will continue to face many development risks and challenges, but the economic fundamentals that will sustain long-term growth remain unchanged. We should stay confident, meet challenges head-on, and consolidate the foundation for economic recovery to ensure sustained and healthy economic and social development," Li said.