The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Ka Sing Chan

HONG KONG, March 6 (Reuters Breakingviews) - China's economic planners have a new target to chase: inflation. Officials unveiled few new economic policies during this week's parliamentary gathering. But the latest 4.5% to 5% annual growth goal signals battling deflation is now a priority in the $20 trillion economy. Building on efforts to curb industrial excess and reviving consumption should help.

For years, Beijing reliably hit its GDP growth target even as inflation undershot. Conflicting industrial and economic policies played a role. State-directed investments into advanced technologies such as green energy, artificial intelligence and robotics, for example, are meant to spur growth and bolster national security. But they have resulted in a massive misallocation of capital, overcapacity as well as destructive price wars in many sectors, all of which have added to deflation. Last year, the consumer price index remained flat, far below the official 2% growth goal.

There are signs of a shift. The latest GDP target is noticeably less ambitious than last year's "around 5%" aim and is probably the most modest since such goals were introduced in the early 1990s. And in his annual policy address on Thursday, Premier Li Qiang pledged to "steer general price levels back to positive territory" – perhaps the government's most explicit acknowledgement of deflation. The central bank has echoed similar messages recently too.

True, the government is sticking with a "around 2%" inflation goal for the year ahead. And China's leadership offered limited concrete plans to rebalance the economy toward consumption. Even so, authorities have leeway to rein in overcapacity and unhealthy competition without being beholden to unrealistic growth targets. Campaigns launched in the second half of last year include efforts to curb price wars among automakers, including BYD 002594.SZ. Antitrust regulators have also targeted firms like the $34 billion travel giant Trip.com 9961.HK, in an effort to protect the earnings of smaller rivals.

Moreover, Beijing can tap its fiscal levers to improve consumption or, if needed, deploy stimulus to offset economic shocks from war in Iran. The country plans to issue 1.6 trillion yuan ($232 billion) in special treasury bonds this year, slightly lower than last year's total. But that can be increased, and Li has pledged more spending on social welfare, including on more affordable housing and creating a “childbirth-friendly society” in the next five years.

Officials and investors will be paying closer attention to the country's prices in the near term.

CONTEXT NEWS

The Chinese government will “steer general prices levels back to positive territory”, Premier Li Qiang announced in his annual report to lawmakers during the government's annual parliament meeting, which kicked off on March 5.

China also set its 2026 economic growth target at 4.5% to 5%. Inflation target remains the same at "around 2%".

(Editing by Robyn Mak; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))