In the news: China announces economic goals, the finance minister signals credit expansion and Baidu CEO suggests relaxing visa rules

China still has flexibility to adjust the budget deficit ratio, and has room to take on more debt to finance projects, said new Finance Minister Xiao Jie. Expanding the ratio will depend on the ability to repay the new debt, Xiao said at a press conference in Beijing on the sidelines of the annual legislative sessions of the NPC. He added that the budget deficit will grow in 2017 to fund tax reduction, expenditures and spending in key areas, with the additional amount being in proportion with the projected rise in GDP. Other points mentioned by the minister included studying an individual income tax reform plan (where certain household spending items may be exempt), giving tax breaks of about Rmb35 billion ($5 billion) to enterprises this year, and local governments continuing to sell general and special bonds. This was Xiao's first public appearance in his role after succeeding the reform-minded Lou Jiwei in November. Xiao previously served as vice secretary-general of the State Council, a key aide to Premier Li. Xiao's statement illustrates the dilemma Chinese policy makers are grappling with: tighten monetary policy, and push ahead with efforts to reduce leverage in the financial system and risk scuttling the 6.5% growth target, or resort to major credit expansion, in a nation where the debt-to-GDP ratio is already close to 300%. His comments indicate a favoring of the latter, which flies against repeated pledges of stability and vows to reduce risk. While the longstanding practice of implicit guarantees in China will probably ensure that there will not be any major fallout on investors, Xiao's slant seems to indicate that the PRC authorities aren't averse to resorting to credit-fueled expansion, as has been seen in recent surges in aggregate financing, the broadest measure of credit.

Baidu CEO pushes for immigration reform for more foreign talent

Baidu chief executive Robin Li has urged China to ease visa restrictions to attract foreign workers, in an effort to draw in some of the workers who may be turned off by U.S. President Donald Trump's immigration policies. The new U.S. president is offering China a great opportunity to lure skilled workers, and domestic tech companies required a more liberal immigration policy to compete against Silicon Valley and help turn innovation into a growth driver. Li, a delegate of the Chinese People's Political Consultative Conference, was speaking at a panel of the two sessions in Beijing on Monday. Chinese President Xi Jinping said in early February that the nation would overhaul its permanent residency regime, and People's Daily reported the next day that a new version of the current green card would be rolled out this year with improved security features. When the U.S. leaves a vacuum, China steps in. Like the TPP, where China stands to benefit from U.S. withdrawal by taking the lead in regional trade. What Li is saying is an extension of that trend, which would certainly help local companies. However, it would take more than just relaxed visa rules to draw in Silicon Valley's finest. Not least because of lower salaries, dangerously high levels of smog, and the slightly less glamorous view of Beijing when compared with California.

Takeaways from Premier Li's NPC work report

With the National People's Congress (NPC) legislative sessions in full swing this week, the focus is very much on structural reform. A shift in tone was evident in Premier Li Keqiang's work report: while setting a GDP growth target of “about 6.5%,” a great deal of stress was laid on controlling financial risk. Other senior officials, including People's Bank of China (PBOC) Deputy Governor Yi Gang, pushed the idea of market stability as well. Non-performing loans, bond defaults, shadow banking and the risks involved in online financing have drawn special attention. While previous meetings have been short on specifics, this edition has seen Chinese officials stepping up communication. Some of the other key takeaways from the work report's economic targets include:

- CPI target: about 3% increase
- Budget deficit: Rmb1.6 trillion (3% of GDP)
- M2 money supply growth: 12%
- Retail sales growth: about 10
- Capacity cuts: 150 million tons coal, 50 million tons steel

Finance minister says China's debt is controllable

China still has flexibility to adjust the budget deficit ratio, and has room to take on more debt to finance projects, said new Finance Minister Xiao Jie. Expanding the ratio will depend on the ability to repay the new debt, Xiao said at a press conference in Beijing on the sidelines of the annual legislative sessions of the NPC. He added that the budget deficit will grow in 2017 to fund tax reduction, expenditures and spending in key areas, with the additional amount being in proportion with the projected rise in GDP. Other points mentioned by the minister included studying an individual income tax reform plan (where certain household spending items may be exempt), giving tax breaks of about Rmb35 billion ($5 billion) to enterprises this year, and local governments continuing to sell general and special bonds. This was Xiao's first public appearance in his role after succeeding the reform-minded Lou Jiwei in November. Xiao previously served as vice secretary-general of the State Council, a key aide to Premier Li. Xiao's statement illustrates the dilemma Chinese policy makers are grappling with: tighten monetary policy, and push ahead with efforts to reduce leverage in the financial system and risk scuttling the 6.5% growth target, or resort to major credit expansion, in a nation where the debt-to-GDP ratio is already close to 300%. His comments indicate a favoring of the latter, which flies against repeated pledges of stability and vows to reduce risk. While the longstanding practice of implicit guarantees in China will probably ensure that there will not be any major fallout on investors, Xiao's slant seems to indicate that the PRC authorities aren't averse to resorting to credit-fueled expansion, as has been seen in recent surges in aggregate financing, the broadest measure of credit.

Baidu CEO pushes for immigration reform for more foreign talent

Baidu chief executive Robin Li has urged China to ease visa restrictions to attract foreign workers, in an effort to draw in some of the workers who may be turned off by U.S. President Donald Trump's immigration policies. The new U.S. president is offering China a great opportunity to lure skilled workers, and domestic tech companies required a more liberal immigration policy to compete against Silicon Valley and help turn innovation into a growth driver. Li, a delegate of the Chinese People's Political Consultative Conference, was speaking at a panel of the two sessions in Beijing on Monday. Chinese President Xi Jinping said in early February that the nation would overhaul its permanent residency regime, and People's Daily reported the next day that a new version of the current green card would be rolled out this year with improved security features. When the U.S. leaves a vacuum, China steps in. Like the TPP, where China stands to benefit from U.S. withdrawal by taking the lead in regional trade. What Li is saying is an extension of that trend, which would certainly help local companies. However, it would take more than just relaxed visa rules to draw in Silicon Valley's finest. Not least because of lower salaries, dangerously high levels of smog, and the slightly less glamorous view of Beijing when compared with California.

In the news: China announces economic goals, the finance minister signals credit expansion and Baidu CEO suggests relaxing visa rules

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