China looks to green economy to hit GDP growth target of 7.5 per cent

Country also puts focus on consumers to drive growth.

At the annual meeting of the National People's Congress in Beijing, Chinese premier Wen Jiabao announced that the growth target for the PRC would remain at 7.5 per cent, the same as last year. In 2012, China only just made the target, as growth slowed to its most leisurely rate in 13 years, expanding by "just" 7.8 per cent.

While the growth goal remains the same, China has lowered its inflation goal to 3.5 per cent, and is planning to increase its budget deficit by 50 per cent to £128bn to "maintain support for economic growth", according to Jiabao.

Separately, the National Development and Reform Commission reported its own targets, aiming for an 8 per cent increase in foreign trade (down from 10 per cent).

As well as the economic targets, China also used the draft budget to announce an increase in military spending, growing 10.7 per cent to £76.41 billion. The Financial Times' Kathrin Hille adds:

Despite the increasingly tense regional climate, experts agree that the days of the sharpest defence spending hikes are over.
This year’s 10.7 per cent increase is roughly in line with last year’s 11.2 per cent hike and a 12.7 per cent increase in 2011.
These figures compare with annual average increases of 16.5 per cent between 2000 and 2009 and 15.7 per cent between 1990 and 1999, according to a forthcoming article by Adam Liff and Andrew Erickson, two US experts on Chinese military affairs.

China's insistence that it will hit the 7.5 per cent growth target indicates the country is not concerned that it may experience a "hard landing" — a quicker-than-expected decline from its current levels of growth to the developed-nation norm of 2-3 per cent. The country has, however, experienced some problems following its current model of growth, which Reuters describes as "investment-driven" and "export-oriented".

As the rest of the world struggles on through the most prolonged depression in living memory, China's export strength has started to look like a double-edged sword, exposing it to weakness it would otherwise be inured to. And its investment-driven growth has also led to massive "ghost cities", hundreds of thousands of new homes built with no-one living in them.

Instead, Jiabao seemed to highlight a model of development which fits with the trend started by the proposal of a Chinese carbon tax, telling the assembly:

The state of the ecological environment affects the level of people's well-being and also posterity and the future of our nation. We should adhere to the basic state policy of conserving resources and protecting the environment and endeavor to promote green, circular and low-carbon development.

But the country still has massive internal issues to overcome before it can really change tack on growth. Local government in China has tremendous independence, and will need to get on board with the plans. Reuters reports:

In a separate document, the Ministry of Finance said it was raising the quota for bonds issued by local governments to 350 billion yuan in 2013, compared with 250 billion yuan in 2012.
It also pledged to further strengthen regulation of local government debt and curb irregular financing activities.

The government has its work cut out.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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John Major's double warning for Theresa May

The former Tory Prime Minister broke his silence with a very loud rebuke. 

A month after the Prime Minister stood in Chatham House to set out plans for free trading, independent Britain, her predecessor John Major took the floor to puncture what he called "cheap rhetoric".

Standing to attention like a weather forecaster, the former Tory Prime Minister warned of political gales ahead that could break up the union, rattle Brexit negotiations and rot the bonds of trust between politicians and the public even further.

Major said that as he had been on the losing side of the referendum, he had kept silent since June:

“This evening I don't wish to argue that the European Union is perfect, plainly it isn't. Nor do I deny the economy has been more tranquil than expected since the decision to leave was taken. 

“But I do observe that we haven't yet left the European Union. And I watch with growing concern  that the British people have been led to expect a future that seems to be unreal and over-optimistic.”

A seasoned EU negotiator himself, he warned that achieving a trade deal within two years after triggering Article 50 was highly unlikely. Meanwhile, in foreign policy, a UK that abandoned the EU would have to become more dependent on an unpalatable Trumpian United States.

Like Tony Blair, another previous Prime Minister turned Brexit commentator, Major reminded the current occupant of No.10 that 48 per cent of the country voted Remain, and that opinion might “evolve” as the reality of Brexit became clear.

Unlike Blair, he did not call for a second referendum, stressing instead the role of Parliament. But neither did he rule it out.

That was the first warning. 

But it may be Major's second warning that turns out to be the most prescient. Major praised Theresa May's social policy, which he likened to his dream of a “classless society”. He focused his ire instead on those Brexiteers whose promises “are inflated beyond any reasonable expectation of delivery”. 

The Prime Minister understood this, he claimed, but at some point in the Brexit negotiations she will have to confront those who wish for total disengagement from Europe.

“Although today they be allies of the Prime Minister, the risk is tomorrow they may not,” he warned.

For these Brexiteers, the outcome of the Article 50 negotiations did not matter, he suggested, because they were already ideologically committed to an uncompromising version of free trade:

“Some of the most committed Brexit supporters wish to have a clean break and trade only under World Trade Organisation rules. This would include tariffs on goods with nothing to help services. This would not be a panacea for the UK  - it would be the worst possible outcome. 

“But to those who wish to see us go back to a deregulated low cost enterprise economy, it is an attractive option, and wholly consistent with their philosophy.”

There was, he argued, a choice to be made about the foundations of the economic model: “We cannot move to a radical enterprise economy without moving away from a welfare state. 

“Such a direction of policy, once understood by the public, would never command support.”

Major's view of Brexit seems to be a slow-motion car crash, but one where zealous free marketeers like Daniel Hannan are screaming “faster, faster”, on speaker phone. At the end of the day, it is the mainstream Tory party that will bear the brunt of the collision. 

Asked at the end of his speech whether he, like Margaret Thatcher during his premiership, was being a backseat driver, he cracked a smile. 

“I would have been very happy for Margaret to make one speech every eight months,” he said. As for today? No doubt Theresa May will be pleased to hear he is planning another speech on Scotland soon. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.