China maintains growth target at 7.5%


China has kept its annual growth target at 7.5% for 2014, allaying the concerns of some but disappointing others that it would lower the goal as part of the government's focus on reforming the economy and trying to rein in ballooning credit.

However, in an address to the annual meeting of the National People's Congress, Chinese Premier Li Keqiang reiterated his commitment to reform to make growth more sustainable. China will cut idle factories and encourage private investment, and it has reduced its target for growth in fixed-asset investment to 17.5%, the slowest in 12 years.

As expected, China is continuing to target inflation of 3.5% and a fiscal deficit of 2.1% of GDP.

The government also intends to wage a "war" on pollution, including by reducing capacity in the steel and cement sectors.

Meanwhile, China's HSBC services PMI rose to 51 in February from 50.7 in January. However, composite PMI slipped into contraction territory with a fall to 49.8 from 50.8. In comparison, official non-manufacturing PMI rose to 55 from 53.4. (PR)

The Shanghai Composite closed at -0.9%.

ETFs: FXI, PGJ, GXC, FXP, CYB, YINN, HAO, KWEB, CNY, ASHR, CHIQ, TAO, DSUM, CHIX, YANG, CQQQ, MCHI, PEK, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, YXI, ECNS, CHIE, CHIM, KFYP, FCA, TCHI, CHLC, CHNA

From other sites
Comments (4)
  • rasanders22
    , contributor
    Comments (612) | Send Message
     
    Make sure they build more empty cities.
    5 Mar 2014, 06:12 AM Reply Like
  • june1234
    , contributor
    Comments (4411) | Send Message
     
    Also announced a 12.2% increase in defense spending
    5 Mar 2014, 08:07 AM Reply Like
  • Mike Holt
    , contributor
    Comments (1863) | Send Message
     
    If the government borrows and spends to achieve a 17.5% targeted growth rate for Fixed Asset Investment spending that already makes up about 50% of GDP, it's easy to see how they can engineer a 7.5% growth rate for GDP as a whole: 17.5% times 50% equals 8.75%, so they will "miraculously" hit their GDP target provided that the rest of the Chinese economy doesn't slow by more than -1.25%.

     

    But, how will this facilitate much needed efforts to rebalance the Chinese economy away from its excessive reliance upon debt-fueled investment spending? By now most investors should understand that the quality of China's GDP growth is more important than its quantity, so while 7.5% GDP growth may still provide the appearance of economic strength to some, most investors are likely to be disappointed to learn that China still intends to seek unbalanced growth that weakens their economy and makes the rest of the global economy, particularly emerging markets, even more fragile.

     

    Speculators, on the other hand, may be pleased that those seeking to control the commanding heights of the Chinese economy intend to continue down this path as the global imbalances that it creates will likely prompt continued lax monetary policies by other central banks around the world so speculators will be able to borrow cheaply to invest in China's 10% to 20% high yield money market accounts and other "wealth management products" that must be relied upon to fund both the 17.5% growth in China's $4 trillion of Fixed Asset Investment spending, and to cover bad loans emerging as the rest of the economy slows.

     

    But, eventually it must be remembered that the return of capital can be more important than the return on capital.
    5 Mar 2014, 08:16 AM Reply Like
  • Daniel5150
    , contributor
    Comments (267) | Send Message
     
    They increase their defense and military spending,yet we continue to decrease ours.Makes you wonder how this will all play out someday
    5 Mar 2014, 09:24 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs