This article is more than 1 year old

This article is more than 1 year old

China has set its lowest growth target in nearly three decades as premier Li Keqiang warned of “tough” challenges facing the world’s second-largest economy.

He set the country’s growth at 6.0 to 6.5%, down from a target of 6.5% last year. In 1990, growth sank to 3.9% because of international sanctions sparked by the Tiananmen square protests. Growth in 2018 was 6.6%, the slowest rate since 1990.

Speaking at the opening of the National People’s Congress, China’s legislative body, on Tuesday, Li said: “We will face a graver and more complicated environment as well as risks and challenges … We must be fully prepared for a tough struggle.”

Li’s state-of-the-nation-style address comes as the ruling Chinese Communist Party faces a difficult year amid a slowing economy, a trade war with the US, and diplomatic tensions over Huawei, the Chinese tech giant. Domestically, China has been hit by public health scandals as well as protests by workers, students, and small pockets of activists.

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Striking a sombre tone, Li stressed the “severe challenges” China is faced last year, including trade frictions, “mounting protectionism and unilateralism” and slowing domestic demand.

“Downward pressure on the Chinese economy continues to increase, growth in consumption is slowing, and growth in effective investment lacks momentum. The real economy faces many difficulties,” Li said.

The two weeks of meetings of legislative delegates and political advisers nicknamed the “two sessions” or lianghui, opened amid a wave of air pollution blanketing the northern part of the country. Beijing is under a security lockdown as authorities dispatched extra police around the city and whisked away activists to other parts of the country.

Changing the GDP growth target to a band rather than a specific figure, which Beijing also did in 2016, is a sign officials may be de-emphasising the data point that has long been the country’s focus.

Li appeared to hurry through the GDP targets, spending most of his nearly two hour speech on pledges to boost employment, cut taxes, and lower costs for businesses.

“Li Keqiang’s main purpose seems to have been to mollifying two constituencies that have been grumbling the loudest: the domestic private entrepreneurs and the foreign business community,” said Damien Ma, co-founder of the thinktank MacroPolo at the Paulson Institute.

“The CCP heard the intensified complaints from the business community and they responded … whether the policies will be effective we will see,” he said.

Officials have so far held back from the same kind of large-scale stimulus issued in the wake of the global financial crisis. A government campaign to root out dangerous levels of debt has led to a slowdown, compounded by a protracted trade war with the US.

In his speech Li promised tax cuts for manufacturing, transportation and other sectors and measures. He also said funding for private businesses would be increased, pledging to increase loans by state-owned banks to small and micro businesses by more than 30%.

Officials are most worried about the prospect of mass unemployment and with that, rising social unrest. Li promised to increase benefits for citizens and develop vocational training for rural migrant workers, high-school graduates, demobilised military personnel, and laid-off workers.

The premier acknowledged already existing sources of instability after a year in which hundreds of parents protested over faulty vaccines, veterans demonstrated over their pensions, and workers and students mobilised in labour strikes.

“There is still public dissatisfaction in many areas, such as education, healthcare, elderly care, housing, food and drug safety, and income distribution. Last year saw the occurrence of a number of public safety incidents and major workplace incidents. The lessons these incidents left us with should never be forgotten,” he said.

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The largely ceremonial event takes place at the beginning of a sensitive year for the party, which includes the 70th anniversary or the founding of the People’s Republic of China as well as the 30th anniversary of the crackdown on Tiananmen Square protests in 1989.

Delegates to the National People’s Congress, a rubber-stamping parliament of about 3,000 deputies that has never voted down proposed legislation, milled around the ornate Great Hall of the People, giving vague statements of support.

“Xi Jinping is an extraordinary leader,” said Song Ya Ping, a delegate from Sha’anxi province as attendees milled around the ornate Great Hall of the People.

Another said: “It’s been hard for Xi, as the head. But under his leadership we will forge ahead and move towards a glorious era of rejuvenation.”

Another delegate, when asked by a reporter how the country would meet its new economic target, said only: “I firmly believe we can meet this target.”