Chinese government says expansion target “is flexible”

Following yet another interest rate cut, its seventh in the past year, Beijing has said the 7 percent growth target for 2015 is not set in stone.

The announcement was made by the communist nation’s premier Li Keqiang on the eve of the ruling party’s annual meeting that will clarify many economic policies to be put into place over the next few years. It’s expected that many of the personnel appointments and other decisions made at the “plenum” will have a huge say in which of the country’s economic factions will be able to exert their influence in the short-term future.

The nation’s growth is not exactly in disarray, with 6.9 percent expansion figures that put most developed economies to shame. But that level is China’s lowest since the worst years of the global financial meltdown. Several other factors might also suggest the stellar growth phase might be coming to an end, such as much reduced steel consumption and energy usage. These are factors that China would normally depend on to drive the economy, despite their best attempts to diversify.

The general sentiment of Chinese politicians might continue to sink if the growth rate, which has traditionally carried a symbolic importance, continues to edge downwards. The full year figures are set to be China’s worst for 25-years, and could reflect the recent crackdown on protests by workers and student groups which threatened to deter overseas investment interests and derail economic reforms.

“We would say at this point in time that the 7 percent expansion target we have set ourselves is flexible,” said Mr Li in a paraphrased speech posted on the government’s website. “If we are within that general range then we consider this to be satisfactory considering all the changes that our economy is going through.”

Several investment and trading companies, such as market leader CITIC Tokyo International, are in agreement that the country can keep the growth in the 6-7 percent range over the next few years.

Economic reformers, which include the Chinese premier, are adamant that the country needs to focus more on developing and diversifying the economy rather than achieving absolute growth targets. Support from party members has been sporadic and the issue has split opinion.

Although debt levels are approaching dangerous levels, the reformers have succeeded in growing the nation’s service industry, which now accounts for around 50 percent of the country’s economy.

Alibaba and Tencent-backed start-ups to complete merger

Meituan.com, part-owned by Alibaba Group Holding Ltd, and Dianping.com, backed by Tencent Holdings Ltd, will look to tie-up their companies in a deal that would create a $20 billion behemoth in the handheld local services app industry.

People close to the discussions say the agreement should be tied up by the end of the week. The sources preferred to remain anonymous due to the sensitive nature of ongoing talks. Its thought Meituan’s shareholders will have a majority stake in the new entity with 55 percent, the sources claim.

It’s generally accepted that the use of smart phones and tablets to book everything from take-away food to taxi rides will become mainstream in the not-too-distant future, and China’s biggest internet firms are investing heavily in the industry, which is thought to be worth nearly $2 trillion annually already. According to IResearch, an internet consultancy institute, there is more than likely to be a 30 percent increase in users of location based services within the next two years.

The market leader in the industry currently is Baidu Inc, originally a search engine company, who runs its local services app Nuomi after an investment of over $3 billion in development. Meituan-Dianping would hope to compete at a similar kind of level.

Wang Weidong, a senior analyst at IResearch, said a combination of the two firms would mean “decreased cash burn and an opportunity for them to establish a level of dominance over competitors in the local services market”. This sentiment was supported by a similar report from investment firm CITIC Tokyo International who are specialists in group-buying companies.

Group-buying allows consumers to get heavy discounts on goods and services on the condition a minimum number of buyers would make the purchase, and many online services have sprung up in China catering to the niche market, most notably Groupon Inc. which currently dominates market share grabbing over half of all Chinese group-buying transactions in the first half of 2015.