But this isn't the bombshell most Western analysts think it is-even though the markets sold off on the day and may continue their temper tantrum later this week.
It's actually what Premier Wen didn't say that really matters. As is so often the case in China, it's what goes on behind the scene that is far more interesting - and actionable.
In that sense, Premier Wen's comments aren't really news at all, but rather recognition of the symbolic priorities attached to Chinese growth.
As I have talked about at length in the past, China needs to do three things this year: 1) keep growth in line, 2) promote monetary stability and 3) be flexible with regard to inflation.
What makes Wen's 7.5% GDP figure significant is that in dropping it by half a percent, Premier Wen is not saying, but, in fact, telegraphing two things:
- China's domestic growth priorities have now trumped growth through exports and manufacturing in terms of relative importance; and,
- The Communist Party expects to shift spending to lower brow projects like ordinary train lines, rural roads, education and technical infrastructure.
This stands in stark contrast to our own politicians who frequently write checks with their mouths that they can't possibly cash.
Understanding the China Story
No. China's leaders are acutely aware of "face" and the risks of losing it. So it's what hasn't been said that's actually far more important here.
The real message is that China expects to maintain growth above 6%, the internal Party Elite's real target, and continue to develop employment opportunities that will keep its 1.3 billion people fed, clothed and housed - so they don't revolt.
Never mind Iran's "Red Line." This is the one that matters.
Understand the importance of 6% and you will understand China in a way that Washington doesn't.
Exports, imports, the yuan, the ghost cities, and hard landings...
None of these things hold a candle to what Beijing considers its most important issue--ensuring China's own survival.