China has lowered its economic growth target to 7.5 per cent, the least since 2004, suggesting leaders will tolerate slower expansion as they try to reduce reliance on exports.
Officials will also aim for inflation of about 4 per cent this year, unchanged from last year's goal, according to a state-of-the-nation speech Premier Wen Jiabao delivered to about 3000 MPs at the annual meeting of the National People's Congress in Beijing yesterday.
By cutting the 8 per cent goal maintained from 2005 to 2011, Wen, 69, is signalling the ruling Communist Party is determined to shift the make-up of growth towards consumption and away from exports and investment. He and fellow officials are also preparing to begin a once-in-a-decade handover of power this year to a new set of leaders.
The growth target should be read as the lower boundary of the Government's "comfort zone", said Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs in Hong Kong.
"It can also be viewed as a gesture from the central Government that local governments should not focus solely" on the pace of expansion.
Wen reiterated that the Government would maintain a "proactive" fiscal policy and a "prudent" monetary policy.
Last month it lowered banks' reserve requirements for the second time in three months to boost lending and sustain growth, after five interest-rate increases from October 2010 to last July aimed at slowing inflation.
The "slightly lower" growth goal was part of efforts to change the nation's economic model to be more sustainable and efficient and achieve a "higher quality of development over a longer period of time", Wen said.
After a decade in power, President Hu Jintao and Wen will step down from their roles and hand over leadership to younger people likely to include Vice-President Xi Jinping and Vice-Premier Li Keqiang.
Wen said the Government planned a budget deficit of 800 billion yuan ($153.27 billion), or 1.5 per cent of gross domestic product.