Quality growth amid deleveraging, reform

In the Government Work Report he delivered to the National People's Congress, China's top legislature, on the opening day of its annual session on March 5, Premier Li Keqiang has laid out policy priorities for 2018 and the longer-term reform agenda.

The GDP growth target has been set at "around 6.5 percent" for 2018, similar to 2017. Li did not mention "higher if possible in practice", suggesting the government is de-emphasizing the GDP target to be more tolerant of the ongoing growth moderation. We (at UBS Global Wealth Management) expect GDP growth to reach 6.6 percent in 2018, slowing from 6.9 percent in 2017 on a cooling property market, declining infrastructure investment and continuous deleveraging efforts.

The government has removed the fixed asset investment target for the first time in recent years; it was 9 percent last year (7.2 percent actual). Planned investment in transportation infrastructure has fallen to 2.53 trillion yuan ($399.4 billion) from 2.6 trillion yuan in 2017 (3.1 trillion yuan actual). The retail sales growth target has been set at "around 10 percent", the same as last year (10.2 percent actual). The urban new job creation target remains at 11 million and the registered urban unemployment rate below 4.5 percent, both unchanged from 2017. The government has also introduced a new unemployment target, the surveyed urban unemployment rate, which includes migrant workers, and set it at 5.5 percent (it was 5 percent by the end last year).