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China will not let the the world’s second-largest economy “slip out of a reasonable range”, Premier Li Keqiang said Friday, as he pledged support in the face of “new downward pressure”, reports BSS/AFP.
Leaders are ready to cut interest rate cuts and further open up the vast economy, he said, after data showed industrial output softened during the first two months of the year to a multi-year low while the crucial unemployment rate rose.
The figures were the latest in a string of indicators pointing to an extended slowdown, with Beijing feeling the effects of a painful trade war with the United States.
“The Chinese economy has indeed encountered new downward pressure, while the global economy is slowing down,” Li said at the end of the annual session of the rubber-stamp National People’s Congress.
He renewed his call not to flood the economy with new stimulus measures as in past downturns and instead advocated doubling down on market economics to “hold off downward pressure”.
“Government reform should be to better allow the market to play a decisive role in allocating resources, that is, focus on the market, and not give the market orders,” he said.
Last week Li laid out a lower growth target of 6.0-6.5 percent this year, from 6.6 percent growth in 2018, which was already the slowest pace for almost three decades.
It “shows that we will not let the economy slip out of a reasonable range”, Li told reporters of the growth target.
“You can say its sends the market a signal of stability,” he said.
Policymakers huddled in Beijing have talked up plans to support the economy, announcing billions of dollars in tax cuts, fee reductions, and financing support for small businesses.
Li said the plan to cut value-added tax for manufacturers — which will help the struggling sector — would take effect on April 1, with social insurance fee reductions coming May 1.
“We face many uncertainties this year, so we have to take more preparations, and we have policy space,” Li said.
Maintaining growth will ensure employment remains stable, Li said. China’s normally steady unemployment rate rose to 5.3 percent in February, from 4.9 percent in December.
China must “prevent a tide of unemployment”, Li said.
China can use tools such as lowering interest rates and the reducing amount of cash banks must keep in reserve to support growth, he said.
In 2018 China lowered banks’ reserve requirement ratios five times to release more funding into the economy and further cuts are expected this year.
Beijing is counting on its millions of consumers and renewed investment to stabilise the economy as slowing global growth and a trade war with the US hit its export machine.
The United States and China have exchanged tariffs on more than $360 billion in two-way trade, and China’s exports and imports plummeted much more than expected in February.
“For some time, China-US trade frictions have been given more prominence, but China-US negotiations have never stopped,” Li said.
“We hope the negotiations will have results,” he said.