China has decided lower its 2015 growth rate target to 7 per cent as it looks to gradually re-set its economy on a sustainable, eco-friendly and corruption-free path.
Addressing China's annual parliamentary meeting that opened today, prime minister Li Keqiang said, following decades of breakneck growth, major structural changes were now necessary to transition the economy towards a ''new normal''.
''China's economic development has entered a new normal,'' Li said.
''Systemic, institutional and structural problems have become 'tigers in the road,' holding up development. Without deepening reform and making economic structural adjustments, we will have a difficult time sustaining steady and sound development.''
Commentators say ''shock therapy,'' was not needed at the juncture rather a calibrated approach was evident in the prime minister's assertion that if China's economy ''can grow at this (7 per cent) rate for a relatively long time, we will secure a more solid material foundation for modernisation".
China's economic growth came in at 7.4 per cent last year, the slowest in 24 years.
Li pointed out the 7 per cent growth was in tune with China's long-term goal of building a ''moderately prosperous society'' – echoing president Xi Jinping's ''four comprehensives'', which formed the mantra for China's transition towards an advanced economy and society.
President Xi, following the tradition of Mao Zedong and Deng Xiaoping, had coined his own doctrine that called for ''comprehensively'' building a moderately prosperous society, based on deeper reforms, rule of law and party discipline.
According to the government, fiscal policy would remain proactive and monetary policy prudent, and the yuan exchange rate would be kept at a reasonable and balanced level.
According to Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong, the economy was in transition, and the government was committed to reforms and the anti-corruption campaign, Bloomberg reported.
He added, these were important for China in the long run, but undermined growth momentum in the short run.
Shares were down, led by energy and power companies including Huaneng Power International Inc. Companies like China CNR Corp and CSR Corp related to railways rallied over 6 per cent in mainland trading after Li said the China was investing over 800 billion yuan ($128 billion) in railway construction.
''The difficulties we are to encounter in the year ahead may be even more formidable than those of last year,'' Li said. ''China's economic growth model remains inefficient: our capacity for innovation is insufficient, overcapacity is a pronounced problem, and the foundation of agriculture is weak.''