China cuts growth target to 6-6.5%

Chinese President Xi Jinping left and Chinese Premier Li Keqiang right at the opening session of China's National People's Congress at the Great Hall of the People in Beijing on Tuesday

As the economy slows, the government has unveiled a military budget increase of 7.5 percent to 1.2 trillion yuan ($177.6 billion), lower than last year's 8.1 percent hike.

China's economy outperformed the official 2018 goal of "around 6.5 percent" by expanding 6.6 percent.

The state media reported that China planned to have five aircraft carriers in the near future with plans to build nuclear carriers like the US.

To help shore up the economy, Li said China's fiscal policy will become "more forceful", with the government pencilling in cuts of almost 2 trillion yuan (US$298.31 billion) in taxes and fees for companies.

Describing China's defence budget increases in recent years as reasonable and appropriate, NPC spokesman Zhang Yesui said the raise aimed to "meet the country's demand in safeguarding national security and military reform with Chinese characteristics".

China's GDP previous year expanded at its slowest pace since 1990 due to the trade war and Beijing's crackdown on financial risks, which raised corporate borrowing costs and hurt investment.

In recent weeks, the United States and China appear to have moved closer to a trade deal that would roll back US tariffs on at least $200 billion worth of Chinese goods.

China also said it will increase military spending by 7.5 percent this year to 1.19 trillion yuan ($177 billion), nearly four times that of Japan, but the budget expansion decelerated from the 8.1 percent gain in 2018.

But with the economy losing steam, Value-Added Tax and social security fees will be cut, in a bid to stave off job losses and the related risk of unrest.

China's top economic official announced a robust annual growth target and a 7.5% rise in military spending on Tuesday at a legislative session overshadowed by a tariff war with Washington.

Tourists take photos of the daily flag raising ceremony at Tiananmen Square on the eve of the opening session of China's National People's Congress (NPC) in Beijing, Tuesday, March 5, 2019.

"A full analysis of developments in and outside China shows that in pursuing development this year, we will face a graver and more complicated environment as well as risks and challenges, foreseeable and otherwise, that are greater in number and size", according to the report.

Li also warned at the congress meeting that the trade war with the USA has had a negative impact on business activities in China.

This year is the 70th anniversary of the founding of the People's Republic of China. "They need to strike a balance between boosting economic activity and not restart another debt-fuelled boom". In 2018, 17 provinces set lower targets.

Li's comments come, somewhat counterintuitively, as Beijing and Washington look to be close to securing a deal on trade after weeks of negotiations between senior figures in both nations.

But in signs that tensions from the tariff battle could soon ease, sources tell CNBC that the US and China are now in the "final stages" of a trade deal that could end this month.

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