Can China ensure a soft landing on stable economic growth?

The National People’s Congress has opened its annual meeting.
Premier Li Keqiang delivered the government work report, in which he announced a growth target for this year of about 7 per cent, down from the previous goal of about 7.5 per cent.
China’s economy expanded 7.4 per cent last year, falling short of the targeted growth rate. Some observers have estimated that – based on China’s electricity consumption, volume of goods shipped by rail and other factors – the actual figure might have been even lower.
In his report, Li said China’s “economic development has entered a ‘new normal” whereby “a model of development that draws on high levels of investment and energy consumption and is heavily driven by quantitative expansion becomes difficult to sustain”.
The growth deceleration can be said to indicate China’s path to economic expansion, which has been powered by investment in projects centering on large-scale infrastructure construction, is nearing its limit.
As workers’ wages soar, dark clouds are appearing over the competitiveness of China’s exports and the nation’s appeal as the “world’s factory”. We can understand Beijing’s acceptance that a slower degree of growth is “normal” and its intention to make structural adjustments to the economy.
Other issues Li addressed in his speech included a greater focus on the quality of economic growth, encouraging personal consumption and measures to prevent the spread of financial risks.
As China’s real estate market conditions have deteriorated, huge loans made to regional governments and other entities that have spearheaded land development are reportedly going bad. The impoverished state of regional cities is especially conspicuous. The government will be tested on how it plans to avoid social unrest.
China also needs to advance the consolidation and reorganisation of its bloated state enterprises to spur the growth of private businesses.
Pain will accompany reforms that drive a wedge into vested interests. It will not be easy to keep a lid on public dissatisfaction while swinging the big ax of reform. The administration of President Xi Jinping faces a difficult task in steering the nation through this challenge.
Despite the economic slowdown, China’s defence budget was increased by more than 10 per cent from the previous year. It has now swollen to about 3.4 times the size of Japan’s defence-related expenditure.
Much of China’s spending focuses on strengthening its nuclear capabilities, as well as its air and sea forces for its maritime expansion and efforts to stand up against the US.
If other costs such as military-related research and development spending were included, the actual size of China’s defence budget would be significantly larger than the publicly announced figure. This opaque military expansion will only stoke a growing distrust of China.