Li Keqiang Says It's Okay Even If Growth Target Is Not Met This Year

Indicating a Practical Downgrade as Achieving the 5.5% Target Becomes Difficult
"Stable Inflation and Employment Are More Important Than Economic Growth Rate"

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Premier Li Keqiang, who oversees the Chinese economy, indicated that he would tolerate not meeting this year's economic growth target. This is interpreted as a de facto indication of a downward revision of this year's growth target. It is the first time this has happened since the reform and opening-up policy.

[Image source=Yonhap News]

On the 19th, during a special virtual dialogue with global business leaders hosted by the World Economic Forum (WEF, Davos Forum), Premier Li said, "Maintaining stable prices and employment is more important than the economic growth rate," adding, "We can accept growth rates that are somewhat higher or lower."

He continued, "Maintaining key economic indicators within an appropriate range also means that the macroeconomy is experiencing sustained and steady growth," emphasizing, "China's macroeconomic policies are consistent, and we will strive to maintain our targets."

A source in Beijing explained, "In the morning, there were meetings on epidemic prevention, and in the afternoon, meetings on economic growth, causing confusion within the Chinese official community, with internal complaints often heard," adding, "Premier Li's remarks seem to imply that while maintaining two conflicting policies (lockdown and growth), there will be no penalties for missing the targets."

China's economic growth rate in the second quarter this year was only 0.4% compared to the same period last year. This is the second worst figure ever since the -6.8% growth in the first quarter of 2020 when COVID-19 broke out.

Lockdowns in major cities such as Shanghai caused disruptions in industry and logistics networks, and domestic demand (consumption) shrank significantly. As a result, China's gross domestic product (GDP) growth rate for the first half (Q1?Q2) was 2.5%, less than half of this year's target of around 5.5%. Retail sales, a gauge of domestic demand, decreased by 0.7% compared to the same period last year, pulling down the growth rate.

Premier Li also hinted at partially easing quarantine and other epidemic prevention policies on the same day. He added that China will strengthen cooperation with many countries around the world through orderly resumption and increase of international flights, expansion of foreign trade, increased personnel exchanges (including international students), and support policies for overseas companies.

Meanwhile, the People's Bank of China, the central bank, kept the loan prime rate (LPR), the benchmark interest rate, unchanged on the 20th. The People's Bank announced that the 1-year and 5-year LPRs remain at 3.7% and 4.45%, respectively, the same as the previous month.

This content was produced with the assistance of AI translation services.