China lowered its goal for economic growth and announced a major tax cut, as policymakers seek to pull off a gradual deceleration while grappling with a debt legacy and the trade standoff with the U.S.
The gross domestic product growth target released Tuesday morning in Premier Li Keqiang’s annual work report to the National People’s Congress was set at a range of 6 to 6.5 percent for 2019. The shift to a band from the previous practice of using a point figure gives policy makers room for maneuver and compares with last year’s “about” 6.5 percent goal.
The lower bound of the GDP target would be the slowest pace of economic growth in almost three decades, a consequence of China’s long deceleration as policy makers prioritize reining in debt risks, cleaning up the environment and alleviating poverty. Warning of a “tough economic battle ahead,” Li announced tax cuts worth 2 trillion yuan ($298 billion) for the year.
“These targets accommodate structural deceleration but not cyclical, which means that policy makers will need to flex their muscles to stimulate the economy,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong. “It’s good news for the market in the short term; bad news for China in the medium term as more leverage will need to be piled up.”