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Caution and commitment in Government Work Report

By Louis Kuijs (China Daily) Updated: 2015-03-06 08:22

Caution and commitment in Government Work Report

Chinese Premier Li Keqiang delivers a government work report on the opening day of the third session of the 12th National People's Congress in Beijing, March 5, 2014. [Photo/china.com.cn]

On Thursday Chinese Premier Li Keqiang presented the Government Work Report for 2015 to the National People's Congress, China's top legislature. What are some of the key messages?

Economic growth remains the key economic objective. The report stresses that "China must rely on development, and development requires an appropriate growth rate". This is important for the outlook for growth and macroeconomic policy.

Observing the challenges and problems, the government calls for reform and structural adjustments. The report notes that economic development has entered a new normal, which it describes as a stage where "challenges need to be overcome and (systemic, institutional and structural) problems resolved". It thus calls for "deepening reforms and making economic structural adjustments".

The government work report commits to concrete reform steps in several areas, but it remains cautious on reforms in important but politically difficult areas such as with regard to intergovernmental fiscal relations, leveling the playing field between State-owned enterprises and other companies, and rural land arrangements.

But there is stronger language than in the past on the appropriate role of the State and the market and what this means for government policy. The report notes the need to foster market-driven activity, innovation and creativity and that this calls for a more clearly delineated and disciplined role for the government.

Accordingly, the report signals a clearer delineation as to the government's responsibility with regard to investment. Traditionally, the government has seen a strong role for itself not just with regard to infrastructure and other public investment but also regarding corporate investment. This year, the government is more restrained in discussing corporate investment, although it does intend to launch new "projects for upgrading traditional industries".

As expected, the target for GDP growth was set at "around 7 percent", down from "around 7.5 percent" for 2014. Several other macroeconomic targets and projections were also lowered, including the targets for inflation and external trade growth.

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