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Instant View: China aims for 7.5 percent economic growth in 2014

(Reuters) - China will maintain its economic growth target for 2014 at about 7.5 percent, as expected, signaling that its policy focus would be slanted in favor of reforms and rebalancing the economy.

Premier Li Keqiang, in a report to the National People's Congress at the start of its annual session on Wednesday, also said military spending will increase by 12.2 percent.

Key points

- 2014 growth target set at about 7.5 percent

- China to make domestic demand main growth engine

- 2014 CPI target set at about 3.5 pct

- Total trade expected to increase 7.5 pct in 2014

- 2014 Budget deficit seen at 2.1 pct of GDP

- China to continue with exchange rate reform

- China to extend yuan floating rate

- Military spending to increase by 12.2 percent

COMMENTARY:

KEVIN LAI, ECONOMIST, DAIWA CAPITAL MARKETS, HONG KONG:

"7.5 percent is in line with the target last year. The target for fixed-asset investment is lower, so that is interesting. I do not see many surprises from their announcement honestly."

HAO ZHOU, CHINA ECONOMIST AT ANZ, SHANGHAI:

"Basically, the recent RMB depreciation and decline in interest rate said that China has engaged in policy easing already.

"I think the government will put more focus on domestic consumption to boost onshore and household consumption.

"(I) didn't see anything significant change in the tone. But the two-way volatility says this is one of the priorities for this year. In this case, the band widening is very likely."

PAUL TANG, CHIEF ECONOMIST, BANK OF EAST ASIA, HONG KONG:

"We forecast GDP growth of 7.6 percent for this year and inflation at 2.8 percent. Officially, they are conservative and the figures are basically in line with our expectation."

"Slower economic growth is already expected for this year. Tightening of fixed-asset investment and lending are seen to remain as the major focuses for this year."

"We're concerned more on policies which will have an impact on people's livelihood, in particular, relating to air quality in the mainland. In the past few years, there have been a lot of environmental protection-related initiatives, but the issue has started to have some negative impact on people's livelihood and in the economy. It is an area that need to be addressed."

SURESH KUMAR RAMANATHAN, HEAD OF REGIONAL INTEREST RATE AND

FX STRATEGY, CIMB INVESTMENT BANK, KUALA LUMPUR:

On whether China indicated it would widen the yuan's trading band: "Yes it is obvious, and it's likely to occur within days or weeks.

"It will affect negatively for Asia ex-Japan, given the CNY is on a weakening trend the last few weeks.

"It will also mean that taking for granted a CNY appreciation ... is no more. Currencies in Asia will remain weak on this, particularly, MYR, IDR, PHP, TWD.

"Naturally to hit that growth target, the CNY must weaken first.

"Only then, we have spillover effects of the 7.5 percent into the rest of Asia."

(Reporting by Jongwoo Cheon and Brian Leonal in SINGAPORE, Anne Marie Roantree, Grace Li and Donny Kwok in HONG KONG; Editing by John Mair)

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