BEIJING • China plans to set a lower economic growth target of around 6 per cent next year from this year's 6 to 6.5 per cent, relying on increased state infrastructure spending to ward off a sharper slowdown, policy sources said.
Chinese leaders are trying to support growth to limit job losses that could affect social stability, but are facing pressure to tackle debt risks caused by pump-priming policies.
The proposed target, to be unveiled at China's annual parliamentary session in early March, was endorsed by top leaders at the annual closed-door Central Economic Work Conference this month, according to three sources with knowledge of the meeting's outcome.
"We aim to keep next year's growth within a reasonable range, or around 6 per cent," said a source who requested anonymity.
Top leaders pledged to keep economic policies stable, state media said last Thursday.
Next year will be crucial for the ruling Communist Party to fulfil its goal of doubling gross domestic product and incomes in the decade to next year.
Economic growth of nearly 6 per cent next year could be enough to meet that goal, given that the economy is expected to expand about 6.2 per cent this year, policy insiders said.
The government aims to boost infrastructure investment by allowing local governments to issue more special bonds next year, but there is less room for tax cuts, the sources said.
The annual budget deficit could rise from this year's 2.8 per cent of GDP, but is likely to be kept within 3 per cent, they said. Local governments could be allowed to issue special bonds worth some three trillion yuan (S$581 billion) next year to fund infrastructure projects, including one trillion yuan front-loaded to this year, they said.
The central bank is likely to ease policy further to encourage lending and lower corporate funding costs, but it wants to avoid fanning property speculation and inflation expectations after consumer inflation hit a near eight-year high last month, the sources said.
A trade deal with the United States could ease pressure on Chinese exporters, but more policy steps are needed to underpin weak demand at home and abroad, policy insiders said.
Top leaders at the meeting listed preventing financial risks as a key priority for next year and called for keeping the debt-to-GDP ratio largely stable.
Any sharper slowdown could put more pressure on small firms, which could in turn hit smaller banks - the most vulnerable part of the banking sector, policy insiders said. Private companies have defaulted on bond payments at a record rate this year, while capital investment has slowed.
REUTERS
