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Growth, reform in spotlight as China parliament meeting opens
March 4, 2014 / 8:00 PM / 4 years ago

Growth, reform in spotlight as China parliament meeting opens

* Premier Li to unveil growth, reform priorities in work report

* Li likely to downplay pace of growth in favour of reforms

* But he is expected to stick with 7.5 pct growth for 2014

* Market sees yuan band widening, deposit insurance imminent

By Kevin Yao

BEIJING, March 5 (Reuters) - China will unveil key economic targets and reform priorities for 2014 at the start of an annual parliament meeting on Wednesday, and expectations are that Beijing will stick to gradual changes to avoid an economic shock.

Last November, at a plenum meeting, the ruling Communist Party announced the boldest set of economic and social reforms in China in nearly three decades, but implementation is yet to fully take hold.

Premier Li Keqiang addresses the National People’s Congress at the start of the nine-day session, and investors will be watching his speech for clues on what lies ahead for the world’s second-biggest economy.

He is likely to provide an economic growth forecast for China in 2014, and analysts have said maintaining last year’s target of 7.5 percent, as he is likely to do, will give room for policy-makers to drive reforms.

Policymakers are aware that an abrupt slowdown resulting from a rebalancing of the economy, and job losses and bankruptcies, could derail the reform agenda.

“Anyone hoping for a re-run of the excitement around last year’s third plenum will be disappointed,” Mark Williams and Qinwei Wang at Capital Economics in London wrote in a note.

“Nonetheless the congress should at least give us a better sense of the government’s priorities and objectives for the rest of the year.”

Some analysts believe there is an off chance that Li could stop issuing an explicit growth target this year, to underscore the importance of economic reforms.

Others say he may stop referring to a “target” in economic growth, instead using “projection” or “expectation” to give more wiggle room for the government.

Li, China’s first premier with an economics doctorate, has vowed to push painful changes “like a warrior cutting his wrist”, but signs of fragility in the economy suggest reforms will be cautious and gradual.

Economists involved in drafting the reforms say that plans that can be implemented without affecting growth or jobs are high on the agenda.

Among the less controversial reforms, the central bank could unveil a long-awaited deposit insurance system in coming months, a step toward its declared goal of freeing up bank deposit rates, and it may also widen the yuan’s trading band to encourage international usage of the currency.

Analysts say some changes, such as government downsizing or closures of debt-laden factories, could take a back seat to avoid fuelling job losses and undermining social stability.

Investors could get a sense of how much of a growth slowdown the government is willing to tolerate from the annual budget, which will also be announced on Wednesday.

The People’s Bank of China under reform-minded Governor Zhou Xiaochuan is widely expected to maintain its efforts to contain elevated debt levels in the economy amid jitters of financial risks.

During the parliament meeting, key government ministries and the central bank will hold a series of press briefings to cover a wide range of economic and social issues.

Li is scheduled to hold a news conference at the end of the parliament meeting on March 13.

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