Ahead of a key meeting of the Communist Party, Chinese Premier Li Keqiang has stated that the nation’s economy must create 10 million jobs per year, and sustained growth of at least 7.2% will be necessary to achieve that.
Li also warned that the government must avoid the temptation to follow the lead of the United States and others by running higher deficits and printing more money as a way to stimulate the economy. “This kind of short term stimulus policy is hard to sustain,” he said.
The country has averaged growth of around 10% a year for the past few decades. Beijing has an official annual GDP target of 7.5% for this year, as it tries to find moderate expansion driven by consumption of its growing middle class rather than from global exports as it has done. Demand for Chinese goods has dwindled due to the economic weakness around the world.
Americans by and large expect China to succeed in its efforts at continued economic growth, judging by results of a recent survey conducted by GfK North America. Though more than half of respondents (59%) said that the United States is now the dominant economic power in the world, more than a third (35%) of them believe that China will inherit that title by the end of the decade.
Li’s comments suggest that China is comfortable with the current pace of economic growth and that short-term stimulus is unlikely in the near future. The upcoming meeting of the Communist Party, called the third party plenum, is expected to produce a framework for reforms. Analysts will be watching closely for any signs of change to such areas as shadow banking, tax policy and the real estate market.