China may need a growth rate of 7.2 percent in order to create enough jobs in the economy, Premier Li Keqiang said in a speech to the All-China Federation of Trade Unions on October 21. Li's remarks, however, were published only on late Monday.
China needs 7.2 percent growth a year to generate 10 million new jobs annually and to maintain the urban registered jobless rate at around 4 percent, Li was quoted as saying. "The reason why we want a steady growth is to preserve jobs."
Li also hinted at government's reluctance to introduce short-term stimulus measures to speed up growth. He said China will neither inflate the budget deficit nor ease monetary policy to boost economic expansion.
Expanding the deficit to stimulate investment can be effective for a short-period of time, but this requires appropriate operational space for fiscal and monetary policies, he said. Still, it is difficult to sustain this kind of short-term stimulus, the premier said.
China has a lot of money in the pool. If the government increases the money supply, this is "more likely to lead to higher inflation," Li said, adding that hyperinflation will not only disrupt the functioning of the market, but also have enormous impact on people's livelihood.
Meanwhile, a survey by Markit Economics and HSBC revealed Tuesday that China's service sector expansion gained further momentum in October with firms stepping up hiring for a second consecutive month to meet increased output requirements.
The headline services business activity index rose to 52.6 from 52.4 in September. A PMI reading above 50 indicates expansion of the sector.
The improvement, coupled with increased momentum in the factory sector, is likely to fortify authorities' resolve to push through further restructuring of the economy.
Top Chinese leaders will gather in Beijing this weekend for the third plenum meeting of the 18th Communist Party of China (CPC) Central Committee to discuss the future course of the government's reform program.
According to the Markit survey, new work at service providers increased at the fastest pace in seven months. Also, firms were optimistic regarding the 12-month business outlook, generally expecting activity levels to be higher in one year's time.
Employment increased for the second successive month at service providers, though the rate of expansion was only slight, the survey found.
"Service sectors saw modest but broad-based improvement into fourth quarter, as greater volumes of new business translated into the second consecutive expansion of employment," Hongbin Qu, chief economist at HSBC, said.
"Service sectors are likely to find support from the ongoing recovery of manufacturing growth and signs of improving labor market conditions. This should help cement China's growth momentum in the coming months," the economist added.
The composite output index, that gauges the performance of both manufacturing and service sector firms, rose to 51.8 from 51.2 in September.
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