5 Takeaways From China's State-of-the-Nation Speech

With a state-of-the-nation speech, Chinese Premier Li Keqiang announced an era of slower growth, saying “China’s economic development has entered a new normal.” The nearly 100-minute speech inside Beijing’s Great Hall of the People on Thursday outlined the Chinese government priorities for the coming year. The overriding imperative: generating enough growth to keep people happy while the government guides a transition away from smokestack industries to services.

#1: China’s ‘new normal’ is slower, but not slow.

The lowered growth target of about 7% is the lowest in over a decade, but still — Chinese state media reminded — fast for a major economy. A willingness to see an economic free-fall after years of heady growth it isn’t. Mr. Li several times cited the need to keep the economy humming along. He said maintaining “medium-high-level growth” is crucial to boosting living standards, creating jobs and finding new growth drivers.

#2: Is smaller better?

While China’s large and often unpopular state enterprises typically capture a large share of bank loans and other government support, Mr. Li gave more than a shout-out to small businesses. He promised to make it easier to start new businesses and encourage people to do so. It isn’t so much an ideological retreat from state control to the private sector. The reason, he said, is that China needs to create jobs and smaller businesses do that.

#3: The government isn’t going away

For all the progress, China’s government still believes strongly in the state’s hand over the invisible hand. The deficit is being widened – to 2.3% of gross domestic product from 2.1% – to spend more money to create growth. Big infrastructure projects are still in vogue, with the government promising 800 billion yuan (about $127.6 billion) for new railways and a similar amount for water projects. One of President Xi Jinping’s pet projects, a bevy of cross-border infrastructure projects to bind neighboring economies to China’s orbit known as the new Silk Road, received three mentions.

#4: What about the environment?

Expected to be a hot topic, the environment didn’t feature highly in government priorities. Last year, Mr. Li vowed to “declare war on pollution” in a bow to rising middle-class complaints about noxious air, especially in Beijing. A documentary by a former state TV reporter released last weekend went viral. Mr. Li’s speech, however, offered tinkering on already-laid plans. Energy intensity – a measure of energy used to create economic growth – is to be cut 3.1%, lower than last year’s 4.8% but enough to reach a long-term target.

#5: China still has a long way to go.

For all China’s tremendous success in becoming an economic powerhouse, income gaps are wide and many people — especially in rural areas — struggle. These government reports are a good reminder of that. This year, Mr. Li said, 60 million more rural Chinese will get access to safe drinking water. Some 200,000 people live without electricity, though more will get it, he said. The social safety net the government has struggled to build out is still thin. The government’s raising pensions, but even so the lowest basic pension across urban and rural China will be 70 yuan a month, less than $12.