China pledges stable growth, deepening reform

China keeps its economic growth target unchanged at around 7.5 percent this year as the government looks to achieve stable growth while driving through reforms for a more balanced model. "On the basis of careful comparison and repeatedly weighing various factors as well as considering what is needed and what is possible, we set a growth target of around 7.5 percent," said the government work report delivered by Premier Li Keqiang at the parliament's annual session Wednesday. This is the third consecutive year that the government put the goal at 7.5 percent. China's economy expanded 7.7 percent last year, well above the government goal, but a set of data that pointed to softening manufacturing activity in recent months renewed concerns on the growth outlook of the world's second largest economy. Describing the economy as at a critical juncture where the paths upward is "particularly steep" amid challenges from at home and abroad, the premier stressed that China must keep economic development as the central task and maintain a "proper economic growth rate". He reiterated that reform is the top priority for the government's work this year, four months after a key meeting last November outlined a wide-ranging reform package. To ensure the economy stay within a "proper range", the government promised to continue to implement a proactive fiscal policy and a prudent monetary policy. It projected a budget deficit of 1.35 trillion yuan, an increase of 150 billion yuan over last year, and a 13-percent rise in broad money supply in 2014, while vowing to keep inflation at around 3.5 percent and create 10 million more urban jobs to ensure the registered urban unemployment rate does not rise above 4.6 percent. To shift the growth away from the export- and investment-led model, China will make domestic demand the "main engine" that drives growth and take investment as the "key" to maintain stable growth, the report said. Although the policy tone is largely unchanged from last year, analysts expect authorities to put on more focus on deepening reforms this year, albeit in a gradual and cautious manner. Premier Li announced Wednesday to set up a deposit insurance system, considered a precondition for freeing deposit rates, the last and most important step of interest rate liberalization. The decision came along with repeated promises to expand the floating range of exchange rates and move toward yuan convertibility under capital accounts. The report said China will overhaul the current financing scheme for local governments to issue bonds, its latest step to contain the mounting debt problems. Containing local government debt risks has been high on the government's agenda for 2014. It is listed as one of the government's six priorities at a tone-setting economic work conference in December. Despite various estimates on the size of China's local government debt, the National Audit Office issued its own audit results at the end of last year, which estimated local government debt was 10.89 trillion yuan (1.78 trillion U.S. dollars) as of the end of June 2013. An emerging consensus is that China's government debt is generally manageable but could get out of hand if its structural problems and lack of oversight are not addressed in a timely manner. Together with a range of other steps to address public concerns, Premier Li said China will "declare war" against pollution and penalize crooked officials "without mercy" in accordance with the law.