China ditches its annual growth target for the first time
- China ditched its annual growth projection for the first time in decades in a rare move that shows the true scale of the coronavirus economic impact.
- Every year China sets a formal target for GDP growth, usually around 6%, and generally meets it.
- However, the uncertainty caused by the coronavirus led to its scrapping.
- "Our country will face certain factors that are difficult to predict in its development," Li Keqiang, the Chinese premier and President Xi Jinping's number two, said.
- Analysts say China's timing could not be worse in both ditching its GDP target and establishing a new national security law on Hong Kong, amid escalating US-China tensions and increased calls for investigation into the origins of COVID-19.
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China has scrapped its customary growth target for 2020, the latest sign of how the coronavirus pandemic has ravaged the world's second-largest economy.
"I would like to emphasise that we have not set a specific target for economic growth this year," said Chinese Premier Li Keqiang in his annual policy address at the National People's Congress session on Friday in Beijing.
"It is because our country will face certain factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the global economic and business environment."
Doing away with years of precedent, China's ditching of its gross domestic product target is an admission of "great uncertainty" the economy is faced with from ruptures caused by the coronavirus.
China has reportedly never missed setting a growth target since its government began to reveal such objectives in 1990. On this news, analysts warned that China economists will have to actually figure out possible growth projections for 2020 for the first time in a generation.
The true extent of the coronavirus impact on China's economy is not yet known, but the country's economy recorded its first contraction on record in the first quarter of 2020, shedding 6.8% of GDP.
It appears to have rebounded somewhat in the past couple of months, with data released this week showing industrial production bouncing back.
In the same address, the Chinese premier also pledged to impose "enforcement mechanisms" on Hong Kong and Macau to prevent acts that endanger national security.
"We will fully and faithfully implement the policy of "One Country, Two Systems," under which the people of Hong Kong govern Hong Kong and the people of Macao govern Macao, with a high degree of autonomy for both regions," Li Kequiang said.
Hong Kong's Hang Seng Index dropped sharply, losing 5.9% at the close on Friday.
Analysts say China's timing could not be worse.
"In all honesty, the timing could not be worse by China, facing increasing calls for a more open investigation into the origins of COVID-19, and criticisms about leading Belt and Road borrowers into debt traps," Jeffrey Halley, an Asia Pacific market analyst at OANDA, said in a note.
Li Keqiang also said expected fiscal deficit could shoot over 3.6% of GDP this year, with an increase in deficit of one trillion yuan (R2.5 trillion) over 2019.
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