* China cuts budget deficit to 2.6 pct of GDP from 3 pct last year
* China sets CPI target at around 3 pct vs 3 pct last year
* China to see reasonable growth in M2 this year - Li (Adds premier’s comments on monetary policy, NDRC’s comments on M2)
BEIJING, March 5 (Reuters) - China aims to expand its economy by around 6.5 percent this year, the same as in 2017, Premier Li Keqiang said in remarks prepared for delivery at the opening of the annual meeting of parliament on Monday.
The goal was kept unchanged even though the economy grew 6.9 percent last year, exceeding the government’s target, suggesting that Beijing is keeping its focus on reducing risks to the financial system from a rapid build-up in debt.
Sources previously told Reuters that China will maintain its growth target at “around 6.5 percent”.
Economists expect growth momentum to weaken this year as the government reins in corporate debt, leading to higher borrowing costs, while a war on pollution and a cooling property market will slow heavy industries and real estate investment.
Growing trade frictions with the United States have also jumped to the top of the list of risks facing China this year.
President Donald Trump announced last Thursday he would impose hefty tariffs on imported steel and aluminium to protect U.S. producers, risking retaliation from major trade partners like China, Europe and neighbouring Canada and sparking fears of a global trade war.
Li said China opposes protectionism and supports the settlement of trade disputes through negotiation, but will “resolutely safeguard” its legitimate rights and interest.
Li said China will improve supervision over shadow banking, internet finance and financial holding companies, and step up risk controls at financial institutions.
While maintaining a proactive fiscal policy, Li said China cut its budget deficit target to 2.6 percent of gross domestic product from 3 percent in 2017.
The budget deficit target cut was the first in years, suggesting Beijing will be more watchful of fiscal spending as China advances its fight against financial risks.
Most analysts had expected the 2018 target would be largely maintained or come in slightly lower, estimating the government exceeded the 3 percent level last year.
Heavy government infrastructure spending was a major driver behind China’s forecast-beating growth last year, but Beijing has been cracking down in recent months on some rail and road projects launched by local governments as it seeks to curb their massive debts.
Li also said China will keep its prudent monetary policy neutral, reaffirming authorities’ position.
China will keep monetary policy neither too loose nor too tight, and will maintain reasonably steady liquidity, he said.
Li also said he expects reasonable growth in broad M2 money supply and total social financing this year, without stating a target.
The National Development and Reform Commission, the state planner, said in a separate report that outstanding total social financing (TSF) and M2 growth will grow at a similar pace this year as in 2017.
TSF grew 12 percent last year, in line with the target, but M2 growth slowed to 8.2 percent, below the 12 percent goal. ANZ had expected both targets to be set at 10 percent or lower this year.
China also set its consumer price index at “around 3 percent” compared with 3 percent last year, as widely expected.
Stability will be the watchword this year as President Xi Jinping pursues his vision of turning China into a “modestly prosperous” nation by 2020 and into a “strong power” on the world stage by 2050.
Ahead of the meeting of the National People’s Congress (NPC) this year, authorities have stepped up a crackdown on big-spending conglomerates, after a year of financial deleveraging that has targeted risky shadow financing and curbing corporate debt.
The NPC, which will end on March 20, is expected to approve the restructuring of various government departments and the appointment of several key officials including a vice president, vice premiers and a new central bank governor. (Reporting by Kevin Yao and Sue-Ling Wong Writing by Ryan Woo Editing by Kim Coghill)