China Abandons Growth Target for Year as Coronavirus Disrupts Economy

BEIJING (Reuters) – Building on previous years, China abandoned an annual growth target for 2020 on Friday, in recognition that restarting its economy after the coronavirus outbreak will be a slow and difficult process.

In his annual report to parliamentarians meeting in Beijing, Prime Minister Li Keqiang said that the country had achieved great achievements in its response to the coronavirus epidemic and that economic development was a top priority. But while he set goals to limit inflation and unemployment, he did not announce an economic growth target for the year.

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"Currently, the epidemic is not yet over, while the tasks we face in promoting development are immense," said Li. "We need to redouble our efforts to minimize the losses resulting from the virus."

Li's work report, delivered at the opening of the legislature's annual meeting, the National People's Congress, also failed to provide details of Beijing's plans to impose strict new security legislation on Hong Kong in the coming months. China's leadership released those plans on Thursday night, and more details are scheduled for release after Mr. Li's speech; the Hong Kong stock market fell 3% on Friday morning, while investors seemed alarmed by Beijing's security plans.

The two main political movements in the congress – moving away from a previously sacrosanct growth target and pressing for an offensive to subdue the opposition in Hong Kong – suggested that even when China recognized the cost of the pandemic, the government is determined to show that will not be. politically intimidated by the crisis.

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Li, who is second in the Communist Party hierarchy, behind Xi Jinping, the country's top leader, delivered his speech to the nearly 3,000 congressional delegates who wore masks while sitting in organized rows in the ornate Great Hall of the People.

It was one of his rare opportunities to attract political attention, which usually shines almost exclusively in Xi. During the coronavirus outbreak, Li took on an important auxiliary role for Xi, taking charge of the leading group formed to guide China's response.

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The annual congress, which usually meets in early March for about two weeks, had been postponed and shortened to one week this year due to the coronavirus crisis. Even in ordinary times, the meeting is both symbolism and substance – a vehicle controlled by the party to praise its leadership and pass laws and budgets in a process that aims to convey the image of a transparent government.

This year, however, the symbolism is more important than usual. Mr. Xi sought to project confidence and absolute control while the government tries to revive the economy, restart schools and businesses and claim credit for ending the epidemic that spread to Wuhan in central China at the end of last year.

This week, the coronavirus outbreak had infected more than 89,000 people in China, including more than 4,600 who died of the virus. Delegates opened the session with exactly 60 seconds of silence for the victims of the outbreak.

"In the fight against the epidemic, a group of medical teams, staff and workers, community agents sacrificed their lives and many patients lost their lives," said Li Zhanshu, president of the congress and one of the seven men who govern China. as members of the Politburo Standing Committee. "We express our deepest condolences for the sacrifice of deceased martyrs and countrymen."

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The unusual arrangements for this year's congress meeting reflect continuing concerns that China has not fully contained the outbreak. Most journalists have virtually no access to events and should instead follow the procedures and participate in news conferences via video links. Delegates were required to do nucleic acid tests for the virus before they could even travel to Beijing.

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On the agenda are proposals to improve the country's disease and hospital surveillance system, after the exposed coronavirus outbreak systematic failures. Investors are also looking to the meeting – which will approve a late 2020 budget – to offer a clear sense of direction in the economy.

Li's budget proposal calls for an economic stimulus program equivalent to about 2% of the country's economic output last year. This is much less than spending on extra deficits in most industrialized countries. China's central government budget deficit was just 3% last year.

China's top financial planners suspect that the government will now borrow even more money to distribute checks to the public the way the governments of the United States, Hong Kong and other countries have done so. Debt-fueled stimulus programs helped the Chinese economy recover quickly from the global financial crisis a decade ago, but left the country overwhelmed with debt and flooded with worthless projects.

Li announced a series of small measures that are likely to be popular, but will be modestly priced. He said the government would cut the cost of broadband Internet access this year by 15%, for example. And he said the government would increase its subsidies for basic medical insurance for rural and non-urban residents – but only just over $ 4 a year per person.

Li emphasized that, despite the economic slowdown, there would be no way to go back to eradicating persistent poverty by the end of this year, a goal that Xi constituted a pillar of his image as a people man.

Military spending will also continue to grow, with budget documents released by Li saying it would rise by 6.6% this year, even though general spending by the central government is expected to fall 0.2%.

This increase in military spending is likely to represent an expansion in its share of production across the country, as economists are forecasting growth of just 1 to 2% this year.

Li made a clear effort to reassure domestic and foreign investors that China remains committed to its gradual evolution, moving away from central planning towards greater reliance on markets.

"We need to seek reforms and open up as a means of stabilizing employment, guaranteeing people's well-being, stimulating consumption, energizing the market and achieving stable growth," he said. He did not address recent trends that pointed to the contrary, such as the sharp shift in the state-controlled banking system towards more loans to state-owned companies rather than private companies.

He reaffirmed China's commitment to the phase 1 trade agreement with the United States, which has allowed the United States to maintain a wide range of tariffs on Chinese products, while China resumes the purchase of many American pigs and other agricultural products. Because of the pandemic, China fell far short of the goals of this agreement for imports of American manufactured goods and energy.

The Chinese prime minister's annual work report generally avoids commenting directly on diplomatic disputes, and Li did not speak directly about tensions with the Trump administration, which accused Beijing of delays and cover-ups that allowed the virus outbreak to expand in a pandemic. .

China maintained that it acted quickly and transparently and Li signaled that China would continue to promote itself as a responsible partner in the global health crisis.

But at the same time, it also included a rare recognition that China had made mistakes in dealing with the pandemic.

"Many weak links have been exposed in public health emergency management, and people have expressed their views and suggestions, which deserve our attention," he said.

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