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China sets robust growth target to shore up cooling economy

Chinese President Xi Jinping attends the opening session of the annual National People's Congress in Beijing's Great Hall of the People, Tuesday, March 5, 2019. (AP Photo/Ng Han Guan)

BEIJING — China’s top economic official announced a robust annual growth target and a 7.5 percent rise in military spending on Tuesday as its ceremonial legislature opened a session overshadowed by a tariff war with Washington.

In a bid to defuse U.S. and European trade complaints, Premier Li Keqiang promised in a speech to the National People’s Congress that foreign companies would be “treated as equals” with Chinese enterprises.

Li set this year’s growth target at 6 to 6.5 percent, reflecting official determination to shore up a cooling economy and prevent politically dangerous job losses in the face of U.S. tariff hikes and weaker global demand. It is off slightly from last year’s 6.6 percent growth, a three-decade low, but would be among the world’s strongest if achieved.

President Xi Jinping’s government is expected to use the congress to announce measures to support economic growth including a possible tax cut and more support for entrepreneurs.

Legislators also are due to endorse a law that aims to ease tensions with Washington and Europe by discouraging officials from pressuring foreign companies to hand over technology. The battle with Washington was sparked by complaints Beijing violates its free-trade obligations by stealing or requiring companies to give up technology as the price of market access.

The two-week gathering of the congress’s 3,000-plus delegates in the cavernous Great Hall of the People is China’s highest-profile event of the year but does little lawmaking work. Instead, it serves as a platform to highlight plans for the year and set the tone for government work.

A gathering of noncommunist groups held at the same time draws tech billionaires, movie stars and ethnic minorities to the Chinese capital.

Li, the No. 2 leader in the ruling party behind Xi, said Beijing will step up spending on technology development including artificial intelligence, electric cars, biotechnology and new materials.

China’s emergence as a potential global competitor in smartphones, solar power and some other technologies has increased the range of products available to consumers and helped to drive down prices. But it also rattles Washington and other governments that worry Chinese competition is a threat to their industries and employment.

Spending on the Communist Party’s military wing, the People’s Liberation Army, will rise to 1.2 trillion yuan ($178 billion), the premier said. China’s total military spending, the second-largest behind the United States, is estimated by independent experts to exceed $220 billion a year.

Li said the central government budget deficit would rise from 2.6 percent of total economic output to 2.8 percent. That reflects efforts to prop up growth by injecting money into the economy through higher spending on public works construction and other initiatives.

The world’s second-largest economy faces a “graver and more complicated environment” and risks that “are greater in number and size,” the premier warned.

The tariff battle with President Donald Trump over Beijing’s technology ambitions has rattled Chinese consumers and investors who also are worried about weakening real estate and auto sales. That is prompting some to put off spending, which could add to downward pressure on economic growth.

News reports say Washington and Beijing might be close to an agreement to end the battle. But the chief U.S. envoy, Trade Representative Robert Lighthizer, said earlier the two sides still had much work to do.

No agreements have been announced on the core of the dispute: U.S. pressure on Beijing to roll back plans for state-led creation of global competitors in robotics and other technology.

Washington, Europe and other trading partners say those violate China’s market-opening obligations and some American officials worry they might erode U.S. industrial leadership.

Communist leaders have balked at changing a strategy they see as a path to prosperity and global leaders. But slowing economic growth is increasing pressure for them to make peace with Trump.

It was unclear whether Trump would be mollified by the technology measure state media say the congress is due to endorse. It would bar officials from using “administrative measures” to pressure companies to hand over technology. Foreign business groups welcomed the proposal but said they need to see details of how it will be enforced to know whether it will improve conditions.

Li promised foreign companies will be “treated as equals” with Chinese enterprises in a “fair and impartial market environment.”

Foreign business groups and governments complain Beijing routinely violates its commitments under the World Trade Organization to ensure such equality, known as “national treatment.” They say regulations on investment, technology licensing and other facets of business discriminate against foreign companies or shield Chinese enterprises from competition.

The European Union filed a challenge in the WTO in July against Chinese rules on technology licensing that the 28-nation trade bloc said treat companies unequally and improperly hamper the ability of foreign companies to protect and profit from their know-how.

Li promised “competitive neutrality,” or a commitment by Chinese regulators to treat state-owned and private companies equally, but gave no details of how far that might extend for foreign competitors.

“Enterprises under all forms of ownership will be treated on an equal footing,” the premier said.

Companies and investors are hoping officials announce details of how Beijing will carry out promises to curb the dominance of state industry and support entrepreneurs who generate much of China’s new jobs and wealth. They are looking for details of a promised cut of up to 1.3 trillion yuan ($200 billion) in value-added and other taxes.

State media have cited other potential topics including revising China’s patent law — another source of foreign complaints — and measures to encourage foreign investment in agriculture and technology and developing free-trade zones.

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