What China plans to do in 2016 and the next 5 years
A business review of Premier Li Keqiang’s government work report
The Chinese economy is slowing down, with declining manufacturing, falling exports, turbulent capital markets, rising debt levels and eroding foreign reserves. GDP growth rate fell to 6.9% in 2015, the lowest in a quarter of a century. Critical economic reforms are not progressing as expected. Ratings agency Moody’s Investors Service cut its outlook on China’s sovereign bonds from “stable” to “negative” on 3rd March 2016. Rumours abound that the Chinese economy is likely to face a hard landing. Is this true? The Report on the Work of the Government (hereafter referred as the Report), delivered by Premier Li Keqiang to the Fourth Session of the 12th National People’s Congress on 5th March 2016, provides a glimpse of
- what had happened in China over the past year,
- what the government plans to do in 2016 to shore up the economy, and
- the key tasks for the 13th Five-Year Plan (2016-2020).
To understand the policy directions and what it might mean in terms of implications to businesses in China and beyond, a summary is presented below.
Economic overview of 2015
Amid global and domestic uncertainties and turbulence, China still managed to have made great strides in 2015, among which:
- GDP reached 67.7 trillion yuan (US$10.4 trillion), representing a growth of 6.9% year-on-year, the highest among the major global economies;
- Over 13 million new urban jobs have been created while employment situation remained stable;
- The service sector as a proportion of GDP rose to 50.5% for the first time;
- Domestic consumption contribution to GDP reached 66.4%, the highest level to date;
- Personal per capital disposable income increased by 7.4% in real terms, higher than the growth rate of the economy;
- Energy consumption per unit of GDP fell by 5.6%, and the targets on energy conservation and emission reductions were exceeded;
- Innovation-driven growth and the penetration of the Internet into all industries picked up speed, and emerging industries grew rapidly;
- Utilized foreign direct investment reached US$126.3 billion, rising by 5.6%, ranking the world’s third largest destination for foreign direct investment;
- Non-financial outbound investment reached US$118 billion, up 14.7%; and
- The Made in China initiative was launched.
Meanwhile, the Report also recognizes that China is confronted with many challenges, including a fall in total imports and exports, sluggish growth in investment, overcapacity in some industries, mixed growth prospects for different regions, imbalances between government revenue and expenditures, latent risks in financial sector, many problems in medical care, education, elderly care, food and medicine safety, income distribution and urban management. There are inadequacies in the work of government, where some reforms, policies and measures have not been fully implemented; a small number of government employees either do not or are unable to fulfil their duties, or behave responsibly.
Main areas of focus of government work for 2016
Download the full report (source: www.pwccn.com )
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