China scraps GDP target for 2020, to lift defence spending by only 6.6pc

China, facing ‘challenges like never before’, has dropped its economic target and will boost defence spending by the lowest rate in years.

Delegates applaud as Chinese President Xi Jinping, bottom centre, and Premier Li Keqiang, bottom right, arrive for the opening session of China's National People's Congress. Picture: AP

China has abandoned an economic growth target for 2020, as the country’s leaders concede they face “challenges like never before”.

Beijing on Friday promised higher spending as it tries to revive an economy battered by the coronavirus pandemic, which started in Wuhan, although it avoided launching a massive stimulus on the scale of the United States or Japan.

It also announced it will boost defence spending by just 6.6 per cent in 2020 - the lowest rate in years.

Premier Li Keqiang revealed the news about the GDP forecast - a remarkable development in its highly centralised political system - while delivering China’s “Work Report”, a state of the nation document, in front of the elite of the Chinese Communist Party in Beijing.

“We have not set a specific target for economic growth this year. This is because our country will face factors that are difficult to predict,” Premier Li said in the Great Hall of the People.

Premier Li’s delivery of the Work Report - a dry policy document, which he reads out in full over almost two hours - came on the first day of the National People’s Congress, the biggest political gathering in the Chinese governing system.

The assembly comes against a background of a 6.8 per cent contraction in the world’s second-largest economy in the first quarter, and a swelling budget deficit required to help meet targets including creating nine million new urban jobs.

Premier Li said the battle against the virus “has not yet come to an end”. He called on the country to “redouble our efforts” to revive the struggling economy.

The government’s budget deficit will swell by 1 trillion yuan ($US140 billion) this year to help meet targets including creating nine million new urban jobs, Premier Li said. That is in line with expectations of higher spending but a fraction of the $US1 trillion-plus stimulus packages launched or discussed by the United States, Japan and Europe.

“These are extraordinary measures for an unusual time,” the premier, said in the nationally televised speech.

China’s 6.6 per cent rise in defence spending is down from the double-digit percentage increases of just a few years ago that have given China the second biggest defence budget in the world behind the US.

The People’s Liberation Army, the ruling Communist Party’s military wing, is the world’s largest standing military and in recent years has added aircraft carriers, nuclear-powered submarines and stealth fighters to its arsenal, most of them produced domestically.

China says the increases in spending mostly go toward improving conditions for troops, while foreign critics say actual spending could be much higher because many items are not included in the official budget.

The PLA was also portrayed as playing a pivotal role during the height of the coronavirus outbreak by sending out doctors and building field hospitals, something recognised in Premier Keqiang’s report to National People’s Congress.

There were 2,897 delegates from around the country in attendance, all wearing surgical face masks, except for the 25 members of the Communist Party’s politburo, led by General Secretary Xi Jinping, who listened from the middle of the stage.

In the first 20 minutes of the speech, Premier Li mentioned Mr Xi - who is also the President of China - eight times and singled out his leadership during the COVID-19 pandemic.

“General Secretary Xi has… personally taken charge,” said Premier Li, while noting the ongoing international challenges.

“China will face challenges like never before,” he said.

The abandonment of a growth target by Australia’s biggest trading partner underlines the extraordinary state of the global economy because of the COVID-19 pandemic.

It’s the first time Beijing has omitted a numerical target since it began the practice in 1994, and comes after China reported a 6.1 per cent gain in gross domestic product last year--its slowest pace in nearly three decades, though within the targeted range of between 6.0 per cent and 6.5 per cent.

It also comes after a first quarter of 2020 in which China reported its first economic contraction in more than four decades, shrinking by 6.8 per cent from a year earlier.

Mr Li said Beijing aims to keep consumer-price inflation at about 3.5 per cent in 2020, higher than last year’s goal of around 3 per cent.

China’s consumer-price index inched closer to its official target last year by rising 2.9 per cent from a year earlier, according to official data. In the first four months of this year, China’s main consumer-price index has increased by 4.5 per cent compared with a year earlier, lifted by higher pork prices.

Mr Li said the government planned to create nine million new jobs in 2020, lower than last year’s target of 11 million new jobs. Official data showed that China exceeded its target last year by creating 13.52 million new jobs.

The government also aims to cap the urban surveyed jobless rate at 6 per cent in 2020, higher than last year. China’s urban jobless rate stood at 5.2 per cent at the end of 2019, before jumping to a record high of 6.2 per cent in February due to the coronavirus shocks. It came in at 6.0 per cent in April.

With Dow Jones Newswires, AP