China targets 7.5% growth and declares war on pollution

China has signalled its commitment to overhauling an unsustainable economy, promising to prioritise reforms, declare war on pollution and maintain its 7.5% growth target.
Premier Li Keqiang also vowed to “break mental shackles and vested interests” in pursuit of economic reforms as he delivered the annual government work report.

Li was speaking at the opening of the annual session of China’s largely rubberstamp parliament. The almost 3,000 delegates at Beijing’s Great Hall of the People observed a minute’s silence for victims of Saturday’s terrorist attack in Kunming as the meeting began.

China’s new generation of leaders under Xi Jinping had already set out pledges of ambitious reform. Years of breakneck development, fuelled by investment and exports, lifted millions out of poverty but led to massive social and environmental problems.

Li’s report – his first as premier – and other documents released on Wednesday reiterate the leadership’s commitment to change. But it is treading cautiously in an uncertain economic environment, with increasing concern about debt-ridden local governments. The leadership has left itself the space to loosen policy if it believes growth is slowing too sharply.

“Local governments should properly set their own growth rates in line with their actual conditions, and must not seek faster growth or compete with each other to have the highest growth rate,” Li said.

Promising to launch “a war on pollution”, he warned: “Smog is affecting larger parts of China and environmental pollution has become a major problem, which is nature’s red-light warning against the model of inefficient and blind development.”

On Tuesday a senior official said China’s smog problem could be solved within 30 years.

China’s top economic planning body, the National Development and Reform Commission, said the government would target 17.5% growth in fixed-asset investment this year, the slowest rate for at least a decade. Last year it expanded by 19.6% when the target was 18%.

The country will raise its military budget by 12.2% to 808.23bn yuan (£79bn/$131bn) – the biggest annual increase since 2011 but in line with a decade or more of mostly double-digit rises. Independent experts argue the true level of military spending is substantially higher, though still dwarfed by that of the United States.

Tensions in the region have risen sharply in the last year, particularly in the East China Sea, where both China and Japan claim a group of islets known as the Diaoyu or Senkaku.

The government did not publish the overall domestic security budget, which has risen dramatically in recent years to outstrip military spending. This year’s figure was for central government expenditure only, including the contribution of provincial and regional governments.

“My guess is that it could be because this is a bit sensitive,” Xie Yue, a professor of political science at Tongji University in Shanghai, told Reuters.

“The domestic security budget is a sensitive issue because it’s been growing every year and it’s used exclusively to maintain domestic order, which has raised suspicions this is a police state.”

Xi Jinping has made a high profile anti-corruption campaign the centrepiece of his leadership and the work report pledged to “penalise offenders without mercy”.