China has trimmed its economic growth target to 7.5 percent this year from an 8 percent goal in place since 2005, mirroring a grim global outlook that pressured China's exports but also reflecting the government's determination to put quality of growth ahead of speed.

The inflation target is being kept unchanged from a year earlier at 4 percent, and control of price rises remains a priority, Premier Wen Jiabao told the National People's Congress which opened in Beijing yesterday.

Boosting domestic consumption is crucial to China's future, Wen said. He promised increased spending on health care and social services to free up disposable income, along with higher wages for middle and low-income earners. He said the government would support more paid vacations, expanded consumer credit and greater buying options to help people spend more.

Subsidies for agriculture would also be boosted and more tuition assistance provided for rural students.

"Expanding domestic demand, particularly consumer demand, which is essential to ensuring China's long-term, steady and robust economic development, is the focus of our economic work this year," Wen said.

In his annual government work report, the premier told more than 3,000 lawmakers: "We aim to promote steady and robust economic development, keep prices stable, and guard against financial risks by keeping the total money and credit supply at an appropriate level, and taking a cautious and flexible approach."

Wen said: "We will improve policies that encourage consumption. We will vigorously adjust income distribution, increase the incomes of low and middle-income groups, and enhance people's ability to consume."

Wen pledged to curb speculative demand in the property market, and said the yuan would be kept "basically stable" with strengthened two-way flexibility in the closely managed exchange rate.

"We will strictly implement and gradually improve policies and measures for discouraging speculative or investment-driven housing demand, build on progress made in regulating the real estate market, and bring property prices down to a reasonable level," he said.

The government would defuse rising local government debt, regarded by many investors as the key risk to fiscal sustainability with about 10.7 trillion yuan (US$1.7 trillion) owed by local governments, according to government figures at the end of 2010.

"We will strengthen supervision of local government debt and guard against risks. We will further investigate and regulate financing companies run by local governments," Wen said.

The fiscal deficit was targeted at 1.5 percent of GDP, up from the 1.1 percent of GDP in 2011.

Wen reiterated that the government would maintain a proactive fiscal policy and a prudent monetary policy, but keep them flexible to reflect changing conditions around the world.

Zhou Hao, an economist at Australia and New Zealand Banking Group Ltd, said: "This year's growth target, compared with last decade's average of 8 percent, indicates the slowing of potential growth based on higher labor costs and falling investment returns.

"The low growth target and relatively high inflation suggested that monetary policies will be mildly relaxed to help boost bank lending and investment."

Zhu Haibin, a JP Morgan economist, said the report sent a signal that the priority of economic work this year was to increase domestic demand, especially household consumption.

"The cut of target rate was aimed at a growth pattern of higher quality," Zhu said. "On the policy side, we anticipated the government would fine-tune policies in response to the changing macroeconomic environment."

Last year, China's economy expanded 9.2 percent on an annual basis to 47.1 trillion yuan (US$7.5 trillion), strengthening its position as the world's second-largest economy. But the pace slowed to 8.9 percent in the final quarter of 2011, the weakest in two and a half years mainly due to shrinking external demand.

Shen Minggao, an economist at Citigroup, said that although the government has pared the official growth target, sufficient room would still be built to achieve 8 to 8.5 percent growth.

Highlights of Premier Wen's government work report

Fiscal and monetary policies
- Continue to implement a proactive fiscal policy.
- Continue to implement a prudent monetary policy.
- Make the floating exchange rate regime more flexible and keep the yuan exchange rate basically stable at an appropriate and balanced level.
Price control
- Control prices and prevent inflation from rebounding by effectively carrying out macroeconomic policies, managing the supply of money and credit, and striving for basic equilibrium in aggregate supply and demand.
Agriculture
- Efforts will be made to increase farmers' incomes, support agricultural technology development, develop rural infrastructure and protect farm land.
- The central government plans to allocate 1.23 trillion yuan for agriculture, rural areas and farmers, 186.8 billion yuan more than last year.
Air quality
- Start monitoring fine particulate matter (PM2.5) in the Beijing-Tianjin-Hebei region, the Yangtze River delta, the Pearl River delta and other key areas as well as in municipalities directly under the central government and provincial capital cities this year.
- The monitoring will be extended to all cities at and above prefectural level by 2015.
Education
- The central government has prepared its budget to meet the requirement that government spending on education accounts for 4 percent of GDP.
- The government will enhance school bus safety to protect children.
People's wellbeing
- Increase employment and the government must continue to follow the strategy of giving top priority to employment.
- By the end of the year, the country will have achieved full coverage of the new old-age pension system for rural residents and the old-age pension system for non-working urban residents.
- Raise subsidies for medical insurance for non-working urban residents and the new system of rural cooperative medical care to 240 yuan per person per year.
- Continue to keep the birthrate low and redress gender imbalance.
- Continue to develop low-income housing, and basically complete 5 million units and start construction on more than 7 million units.