China cuts its economic growth target to 6.5-7 percent

BEIJING (AP) — China's leadership cut this year's growth target for its slowing economy to 6.5-7 percent and promised Saturday to open its oil and telecoms industries to private competitors as part of sweeping reforms aimed at boosting productivity and incomes. The growth target, down from last...

BEIJING (AP) — China's leadership cut this year's growth target for its slowing economy to 6.5-7 percent and promised Saturday to open its oil and telecoms industries to private competitors as part of sweeping reforms aimed at boosting productivity and incomes.

The growth target, down from last year's "about 7 percent" and less than half of 2007's peak of 14.2 percent, was included in a work report delivered by Premier Li Keqiang to China's national legislature in front of nearly 3,000 delegates gathered in the cavernous Great Hall of the People.

Li, the top economic official, promised to press ahead with market-oriented reforms that will include opening the telecoms, petroleum and public utilities industries, though he failed to say whether foreign companies might be allowed in. He said private companies would receive the same treatment as state-owned enterprises in project approval, finance and tax policy.

"We must deepen reform across the board," the premier said in a nationally televised speech. He said the market "must play a decisive role."

The world's second-largest economy has cooled steadily over the past five years as the ruling Communist Party tries to replace a worn-out model based on trade and investment with self-sustaining growth driven by domestic consumption. Growth in 2015 declined to a 25-year low of 6.9 percent and is forecast to drift lower this year.

Plans call for transforming China into a middle-income economy with self-sustaining growth driven by consumer spending instead of investment, trade and heavy industry. That requires the ruling party to cut the dominance of state companies that dominate industries from banking and telecoms to oil and steel and give entrepreneurs a bigger role.

Li promised to open service and manufacturing industries wider to foreign investors, though he gave no details. He promised regulations would be made "more fair, transparent and predictable" to attract investment. Business groups have complained Chinese regulators are hampering access to promising sectors in violation of its free-trading pledges.

Much of China's slowdown has been self-imposed as regulators clamped down on a building boom and nurtured retailing, tourism and other service industries. An unexpectedly sharp downturn over the past two years has raised the risk of politically dangerous job losses and prompted Beijing to shore up growth with mini-stimulus efforts.

Li also said China needs to fix its environmental problems, although he laid out few specifics, and promised more investment in science and research and development to lead the way to more advanced manufacturing and innovative technology.

The latest growth target would be the minimum Chinese leaders have said is required to achieve the official goal of doubling incomes per person from 2010 levels by 2020. Economists warn anything higher could set back reforms by forcing Beijing to prop up growth with more wasteful investment.

Communist leaders have tried in recent years to shift public attention away from the growth target. They say their priority is jobs and so long as the economy generates enough they will accept slower growth.

The slowdown and Beijing's reforms have wiped out jobs in mining, steelmaking and other industries.

Retailing, e-commerce and other service industries are growing and absorbing some idled workers but others are struggling to find work. The government says the economy created 13 million new jobs last year but has not said how many were lost at the same time.

The country needs to create more than 50 million new urban jobs during the five years through 2020, Li said.

The premier pledged to accelerate "supply-side reform," or the painful process of shrinking bloated industries from steel to cement to aluminum in which supply exceeds demand.

That glut has led to price-cutting wars that are driving companies into bankruptcy. Steel producers have responded by exporting their surplus, prompting complaints by China's trading partners.

Li said Beijing will promote mergers and shut down "zombie enterprises" — the Chinese term for companies that are kept afloat by cheap loans from state banks. The premier said targets will include the coal and steel industries, for which plans already were announced in February, but didn't give details of other sectors that will be affected.

The government said this week it expects to eliminate 1.8 million coal mining jobs — about 17 percent of the industry's workforce.

Even that sharp reduction is too small to bring coal supply in line with slack demand, according to JP Morgan analysts. They said that is likely to cause coal prices to plummet another 10 percent this year, worsening the struggle for financial strapped miners.

Li warned that China will "more and tougher challenges" this year including weak export demand.

Manufacturing weakened in February and trade figures due out Tuesday are expected to show a contraction in exports accelerated, with shipments of Chinese goods falling by up to 20 percent from a year ago.

The latest government plan comes as Chinese leaders struggle to reassure their public and foreign investors growth is on track and they are in control following currency and stock market turmoil.

Widespread expectations, despite repeated official denials, that Beijing will weaken its yuan to boost sagging exports has driven an outflow of capital that spiked to a record $135 billion December.

This week, Moody's Investors Service cut its outlook on China's credit rating from stable to negative. The agency cited rising debt, capital outflows and "uncertainty about the authorities' capacity to implement reforms."

In a reflection of official sensitivity, a Chinese deputy finance minister on Friday retorted that Western models don't apply to China.

"This approach is shortsighted," said the official, Zhu Guangyao, according to the government's Xinhua News Agency. "Practice will prove their decision to lower China's credit rating was wrong."