China Aims for 6.5 Percent Annual Growth in Next Five Years

The Premier of China, Li Kequiang, opened China’s Parliament March 5 by saying China planned to grow its economy at an annual rate of 6.5 percent over the next five years, but faced tough struggles. The government intended to create more jobs while restructing industries that were currently inefficient.

6.5 percent growth would be the Chinese economy’s slowest rate of growth in 25 years. However, China is facing a softening of world demand for its exports and tumultuous financial markets. The government also wishes to stop environmental destruction.

The 2016 goal of the Beijing government, according to the article, is to achieve growth between 6.5 and 7 percent. And it aims to increase the money supply by 13 percent while keeping inflation around 3 percent. In 2015 the actual rate of inflation was around half that figure.

In the inefficient sectors of the economy, so-called zombie firms are inefficient and underperforming. They account for a lot of the corporate debt still leftover from the 2009 stimulus money China spent. China will be layoff 5-6 million workers in the coal and steel industry sectors over the next two to three years. It will restructure the zombie firms through mergers, debt deals and bankruptcies. They wish to hold the rate of urban unemployment below 2016. With the layoffs, this means they plan to create 10 million jobs.

To reduce environmental problems, they plan to hold the consumption of energy to 5 billion tons of coal. They also intend to raise spending on their military by 7.6 percent, which is the lowest rate of increase in six years.

Economists expect China’s rate of growth to come in at around 6.5 percent in 2016, a figure most countries would welcome.

Li said the government planned to reform the bond and equity markets. This comes after a period when the Chinese stock market caused worldwide concern through its widespread losses. Its currency the yuan went down in value. The government intervened in these cases. The Parliament will no doubt consider what measures to take to control the stock market.

China’s government aims to maintain stability and reduce the chance that economic problems and unemployment lead to widespread political and social unrest. Chinese citizens are allowing the government to manage the economy with the assumption higher growth will continue to make the Chinese people more affluent.

Another economic issue inside the country is the disparity between property values. In big cities such as Shenzhen and Shanghai, values are spiking up. However, in smaller cities they are stagnant.

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