An installation made of sock textiles is on display at a demonstration hall of the local sock-making industry in Zhuji, Zhejiang province, in February. [Photo/Agencies]

China faces 'formidable challenges', says Li

China plans to lower the annual GDP growth target to around 7 percent from 7.5 percent, the slowest in 22 years, in light of the ongoing property downshift and deflation headwinds, according to a draft government work report delivered by Premier Li Keqiang on Thursday to the National People's Congress.

The growth pace should remain stable within the reasonable range to create at least 10 million new jobs this year, and keep the registered unemployment rate to below 4.5 percent, the work report said.

The upper bound of consumer price inflation is targeted to be 3 percent this year, down from last year's goal of 3.5 percent. It dropped to a five-year low of 2 percent in 2014.

The central government has also set the annual export growth target at 6 percent, compared with the 7.5 percent goal in 2014. It recorded 4.9 percent growth last year, the third consecutive year that it failed to meet the target.

"The report shows that the government will continue to de-emphasize growth targets and put more weights on the "quality" of development, which is characterized by more balanced and sustainable economic structure, better income distribution and less damage to the environment," said Wang Tao, chief economist in China at UBS AG.

The report emphasizes proactive fiscal policy and prudent monetary policy.

It targets a broad money supply or M2 growth of 12 percent compared with the real growth of 14.7 percent in 2014, and the fiscal deficit to increase to 2.3 percent of GDP up by 0.2 percentage point from 2014's fiscal budget plan.

The 11-day NPC meeting, which opened on Thursday, is expected to confirm an easing bias for macro policies, as foretold by December's Central Economic Work Conference, and more monetary and fiscal fine-tunings will be seen in the coming months to stabilize growth, economists said.

The People's Bank of China announced a second interest rate cut in less than four months on February 28, 25 basis points down for the benchmark interest rates.

The central bank also cut the reserve requirement ration in November to increase market liquidity.

China's economic growth rate declined to a 24-year low of 7.4 percent in 2014, failing to meet the annual target of 7.5 percent.