China sets modest economic growth of 6% for 2021

The country will target the creation of more than 11 million new urban jobs as it recovers from the pandemic

In 2021, China will target the creation of more than 11 million new urban jobs. Reuters

China on Friday set a modest annual economic growth target, at above 6 per cent, and pledged to create more jobs in cities than last year, as the world’s second-biggest economy emerged from a 2020 disrupted by the effects of Covid-19.

Last year China dropped a gross domestic product growth target from the premier’s work report for the first time since 2002 after the pandemic devastated its economy. However China’s GDP expanded 2.3 per cent last year, the only major economy to see growth.

“As a general target, China’s growth rate has been set at over 6 per cent for this year,” Premier Li Keqiang said in his 2021 report. “In setting this target, we have taken into account the recovery of economic activity.”

But the 2021 target was significantly below the consensus of analysts, who expect growth could beat 8 per cent this year. Chinese shares fell.

“If sequential growth averages zero from first quarter to fourth quarter this year, we will get around 6.1 per cent annual growth this year,” Nomura said in a note.

“Beijing does not want to set a growth target too close to 8 per ent as it does not want to slash the growth target next year.”

Aninda Mitra, senior sovereign analyst at BNY Mellon Investment Management, said the modest growth target will allow the authorities to emphasise the quality of growth rather than its quantity.

“In the aftermath of the pandemic, a low bar should allow most provinces to cross the hurdle without over-stretching themselves financially,” Mr Mitra said.

In 2021, China will target the creation of more than 11 million new urban jobs, Mr Keqiang said in his report delivered at the opening of this year’s meeting of parliament.

That’s up from a goal of over 9 million new urban jobs last year, and in line with recent years.

In line with an improving economy, the government is targeting a 2021 budget deficit of around 3.2 per cent of GDP, less than a goal of above 3.6 per cent last year.

The quota on local government special bond issuance was set at 3.65 trillion yuan ($563.65 billion), also down from 3.75tn yuan last year.

China also has no plan to issue special treasury bonds this year, after issuing such bonds for the first time last year to support the virus-hit economy.

The government has set its 2021 target for consumer price inflation at around 3 per cent, compared with a target of around 3.5 per cent last year.