There could be a shaky time ahead for China’s economy as the government warns of “severe challenges” this year.
Premier Li Keqiang speaking at a news conference on the final day of China’s yearly parliament, hinted Beijing would accept slower economic expansion this year.
That would be as the government pushes through reforms aimed at providing longer-term and more sustainable growth.
He spoke as it was revealed China’s growth in investment, retail sales and factory output all slumped to multi-year lows.
The data from the National Bureau of Statistics suggests a marked slowdown in the first two months of the year.
Li said: “I won’t deny that we may encounter a more complex situation this year.”
He continued: “By setting the GDP growth rate at around 7.5 percent, we imply leeway or flexibility. We have some tolerance.”
Last year Chinese leaders unveiled reform plans to move the economy more towards growth from services and consumption and away from a reliance on investment and exports.
That includes allowing market forces to play a bigger part in the economy.
Li also signalled the government will allow further debt defaults by companies, something which previously it has avoided.
“We are reluctant to see defaults of financial products, but some cases are hard to avoid,” Li said. “We must enhance oversight and solve problems in a timely way to ensure no systemic and regional risks.”
The recent default by Shanghai Chaori Solar Energy Science and Technology Co was the first on a domestic bond.
The event was hailed by experts as a landmark that will impose more market discipline.
It is being seen as a break from the past when bonds enjoyed an implicit guarantee because the government would bail out troubled firms to ensure stability.