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7 Mar 2016

International Economy

China Held Annual "Two Sessions" Growth Projected at 6.5-7.0%, Economic Structural Change is Main Focus (Current Issue No. 2708)

On March 3 and 5, 2016, China began two top annual meetings, the National Committee of the Chinese People's Political Consultative Conferences (CPPCC), and the National People's Congress (NPC). These meetings are extremely important for China's administration since during them the government usually announces annual policy directions and economic targets. This year, the Chinese government also unveiled the 13th 5-year socio-economic development plan (2016-2020), and set an economic growth target of 6.5-7.0 percent, which is effectively lower than the 7.0 percent target set for 2015. Setting a GDP growth target of at least 6.5 percent for 2016 is seen as an attempt to reassure the public that this year's economy will be unlikely to flounder or experience crisis. At any rate, Chinese authorities will no doubt devise plans for any contingency if economic yields are less than expectation. Moreover, it is notable that this year's economic projection prices in their economic structural adjustment by shifting the weight from exports and investment towards private consumption, as well as stimulating the economy via the use of fiscal policies.
Aside from drafting short-term goals, China also revealed the 'new normal' plan—a long-term economic development plan, aimed at promoting sustainable economic growth through solutions to deep-rooted problems, like overcapacity, that have been constraining its economy.KResearch has assessed that solving overcapacity with the implementation of economic structural change should hit the nail on the head much better than the attempt to inject liquidity into the financial system since it may have led to increased production.

As for the implications of the announced economic policies and current conditions on Thailand, Thai businesses must make certain short- and long-term adjustments. As for the export sector, KResearch expects that our outbound shipments to China will grow 0.5-2.5 percent in 2016 if oil and other commodity prices begin to rise and global economy improves in the months ahead. However, if commodity prices remain low, or even plunge further—heeding that our exports to China contracted 6.1 percent YoY in January—we may need to subsequently revise our projection.

International Economy