"Besides the impacts of the epidemic, the decision can be attributed to the shift in China's economy from high-speed growth to high-quality development, as the government will further focus on stabilizing employment and improving people's well-being," Wen Bin, chief economist with China Minsheng Bank, told Beijing Review. 

China's year-on-year GDP growth stood at 6.1 percent in 2019, contributing to about 30 percent of the global economic growth. However, the economy shrank by 6.8 percent year on year in the first quarter of this year due to the impacts of the COVID-19 epidemic, according to the National Bureau of Statistics. 

Although the economy is picking up with Chinese enterprises accelerating work resumption since March, the worldwide spread of the epidemic, which has led to the global economy shrinking this year, is still posing challenges, Wen said. 

The pandemic has disrupted industrial and supply chains and caused contraction in international trade and investment as well as volatility in commodity markets, according to China's 2020 government report. 

More efforts are needed to drive up foreign investment and trade. They should include enhancing financial support for foreign trade enterprises, expanding international markets, exploring cross-border e-commerce and boosting pilot free trade zones. The government is also expected to drive up domestic demand, which has great growth potential, Wen said. 

He said stabilizing employment is another priority task for the government this year as the epidemic has led to fewer new urban jobs during the past months compared to the corresponding period last year.  

The government report says the China plans to create more than 9 million new urban jobs and keep the surveyed urban unemployment rate at around 6 percent by encouraging enterprises to maintain the existing jobs. 

To support domestic enterprises, the government will introduce proactive fiscal policies and prudent but flexible monetary policies. It plans to increase 1 trillion yuan ($140.6 billion) of deficit over last year. Tax and fee reductions and exemptions will be furthered to back small and medium-sized enterprises (SMEs) and self-employed individuals. These cuts are expected to achieve additional savings of more than 2.5 trillion yuan ($350 billion) for enterprises throughout this year, according to the report. 

It also said the government will encourage banks to substantially increase credit and first-time loans as well as loan renewals without repayment of principal for micro and small businesses. 

SMEs in China have created a large number of jobs while facing great difficulties since the epidemic outbreak. The financial support and preferential policies will effectively reduce their operation costs and help them tide over difficulties. This can help improve employment, people's well-being and market expectations, Wen said.  

The government also pledged to improve people's well-being through measures including keeping the consumer inflation level stable and alleviating poverty. According to Wen, it needs to keep an eye on inflation amid abundant liquidity, which may cause problems such as idle funds, rising house prices and financial risks. To eradicate poverty, it can further shore up poverty alleviation workshops and encourage consumption of products from poverty-stricken regions.  

"As long as stable employment and consumer prices can be ensured and poverty alleviation is continued, China is expected to complete building a moderately prosperous society in all respects, for which this year is the deadline, despite lower GDP growth," he said. 

Copyedited by Sudeshna Sarkar 

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