China trims growth target, warns of debt risk

By Joe McDonald, AP

BEIJING — China’s top economic official trimmed the country’s growth target and warned Sunday of dangers from global pressure for trade controls as Beijing tries to build a consumer-driven economy and reduce reliance on exports and investment.

In a speech to the national legislature, Premier Li Keqiang promised more steps to cut surplus steel production that is straining trade relations with Washington and Europe. He pledged equal treatment for foreign companies, apparently responding to complaints Beijing is trying to squeeze them out of technology and other promising markets.

Li’s report set the growth target for the world’s second-largest economy at “around 6.5 percent or higher, if possible.” That is down from last year’s 6.7 percent expansion but, if achieved, would be among the world’s strongest, reflecting confidence efforts to create new industries are gaining traction.

The premier called for attention to the risks of China’s surging debt levels, which economists see as a rising threat to growth.

Li announced no major initiatives, but that was widely expected as the ruling Communist Party tries to avoid shocks ahead of a congress late this year at which President Xi Jinping is due to be given a second five-year term as leader. Analysts expect Chinese leaders to use the legislative meeting to emphasize reducing financial risks and keeping growth stable.

At a time of demands in the United States and Europe for trade controls, Li warned China faces “more complicated and graver situations” at home and abroad.

“Both the de-globalization trend and protectionism are growing,” Li said. “There are many uncertainties about the direction of the major economies’ policies and their spillover effects, and the factors that could cause instability and uncertainty are visibly increasing.”

Chinese leaders have publicly defended free trade in response to President Donald Trump’s promises to raise duties on Chinese goods, though Beijing’s trading partners complain China is the most closed major economy.

China “may be adversely affected” if Trump goes ahead with “tough policies,” but the impact should be limited, said economist Song Lifang at Renmin University in Beijing.

“With China’s domestic economy still in the phase of transformation, the tasks for China’s economic growth are arduous but with great potential,” said Song. Growth has cooled steadily since 2010 as communist leaders try to develop a consumer-driven economy and reduce reliance on trade, heavy industry and investment.