China expects an even sharper economic slowdown following the lowest growth in a quarter of a century last year, as the country struggles with deflation and an increasingly obsolete economic model.
In an unusually candid annual "state of the nation" address to 3,000 members of China's ersatz parliament on Thursday, Premier Li Keqiang laid out a litany of flaws in the model that has driven the world's fastest-growing major economy for more than three decades.
"Over the past year we have faced more difficulties and challenges than anticipated," Mr Li told the National People's Congress. But "with downward pressure on China's economy building and deep-seated problems in development surfacing, the difficulties we will encounter in the year ahead may be even more formidable than those of last year".
In his annual assessment of his government's work, Mr Li set this year's GDP growth target at "around 7 per cent", down from "around 7.5 per cent" in 2014.
China grew by 7.4 per cent last year, the slowest pace since 1990 and only the second time growth has come in below the official goal since the government began publishing targets in the late 1980s.
The economy grew 7.7 per cent in both 2012 and 2013 and until 2010 it had maintained an annual average growth rate of more than 10 per cent for over three decades. "The target growth rate of approximately 7 per cent takes into consideration what is needed and what is possible," Mr Li said.
Illustrating the breadth of issues Beijing is grappling with, Mr Li's 3 per cent target for consumer price inflation is a far cry from January's annual pace of just 0.8 per cent. The authoritarian Communist party has long believed its legitimacy comes mostly from its ability to deliver high growth rates and rapidly rising material living standards.
But a fixation on growth at all costs has been accompanied by shocking levels of industrial pollution, rampant corruption and disintegration of many social services while exacerbating imbalances in the existing model.
"There are still many problems of public concern in medical services, elderly care, housing, transport, education, income distribution, food safety and law and order," Mr Li said. "As resource-related and environmental constraints grow and costs for labour and other factors of production rise, a model of development that draws on high levels of investment and energy consumption and is heavily driven by quantitative expansion becomes difficult to sustain."
Nevertheless, the party's prescription for what ails the nation appears to be more of the same, at least in the short term. The plans highlighted by Mr Li amounted to looser monetary policy, more government-led investment and more Chinese nationalism at home and abroad.
An ambitious government-led investment programme will build everything from roads to information superhighways, with plans to spend more than Rmb800bn ($130bn) on new railways and more than Rmb800bn on water diversion, irrigation and conservancy projects.
While M2 money supply is forecast to grow by about 12 per cent this year, the "actual supply may be slightly higher depending on the needs of economic development", and Beijing "will adopt a flexible approach in our use of monetary policy tools," Mr Li said.
The People's Bank of China cut interest rates in November and again last week in an effort to curb the growth slowdown and prevent a rise in real interest rates amid the slowdown in inflation.
Mr Li also said it was essential "to strengthen the bonds of attachment and affection of all Chinese, whether at home or overseas, to our fatherland."
"Perhaps Premier Li is appealing to nationalistic feelings because of a general conception that it will be almost impossible for the economy to even grow as fast as 7 per cent for much longer," said Willy Lam, of the Center for China Studies at the Chinese University of Hong Kong. "He is telling people that even if their standard of living is not improving as fast as the government promised they should still support the party and the government."
"李总理之所以召唤民族主义情绪，也许是出于这样一个想法，即中国经济就连7%的增速也保持不了多久，"香港中文大学(Chinese University of Hong Kong)中国研究中心的林和立(Willy Lam)表示。"他是在告诉人们，即使他们的生活水平提高速度没有政府所承诺的那么快，他们也应当继续拥护党和政府。"