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China sets 2015 growth target at 'around 7%' Staff
Tomohiro Ohsumi | Bloomberg | Getty Images

China has set its gross domestic product (GDP) growth target at "around 7 percent" for 2015 - the lowest in 11 years - focusing on quality over quantity as it overhauls its growth model.

The target, which Premier Li Keqiang announced as the annual National People's Congress got under way on Thursday, is in line with market expectations and marks a sharp decline from last year's 7.5 percent target.

China's economy grew at its slowest pace in 24 years in 2014, undershooting the government's target for the first time since 1998. GDP expanded 7.4 percent last year from 7.7 percent in 2013.

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"The deep growth target reduction is probably to manage the expectations of its people and the global community. It also signals that the bottoming-out of China is still nowhere in sight," Howie Lee, investment analyst at Phillip Futures wrote in a note.

Economists say the lower growth target means the People's Bank of China is no longer as hard pressed to unleash monetary stimulus.

"With a 7 percent growth target, there's less scope for monetary easing," Dariusz Kowalczyk, senior economist and strategist at Credit Agricole told CNBC.

China's NPC: What Blackrock is disappointed with
China's NPC: What Blackrock is disappointed with

Since November, Beijing has cut interest rates twice and lowered the reserve requirements of major banks in a bid to spur growth in the world's second largest economy.

The Chinese premier also tipped 2015 consumer inflation of around 3 percent and expects a budget deficit of 2.3 percent of GDP.

"Inflation is not a major issue this year so whether its 3 percent or 3.5 percent doesn't make a difference. I'm a little disappointed with the fiscal deficit - 2.3 percent - I think they can be more proactive with that cos they have the capacity to rely more on fiscal policy," said Helen Zhu, head of China Equities at BlackRock.

China aims to float the yuan more freely, the premier added, noting the currency will be kept at an appropriate and balanced level.

The country will also plans to broaden its use of forex reserves, he said.

China lowers 2015 growth target: What it means
China lowers 2015 growth target: What it means

Military spending

China will raise its military spending by 10.1 percent this year to 886.9 billion ($141.4 billion), building on its nearly two-decade run of annual double-digit rises in the budget, signalling that a slowing economy will not impact Beijing's focus on defense spending.

"As a large country, China needs the military strength to be able to protect its national security and people," said Fu Ying, a spokeswoman for the National People's Congress. "Our history teaches us a lesson that when we lag behind, we come under attack. We won't forget that."

Defense spending was budgeted to rise 12.2 percent to $130 billion, second only to the Pentagon's proposed $534 billion base budget for the U.S. military.

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China's 7% growth target is an 'illusion': Pro

Zero tolerance for pollution, corruption

Premier Li also addressed the highly sensitive topic pollution and corruption, both of which the government will have zero tolerance for, he said.

"We must strictly enforce environmental laws and regulations; crack down on those guilty of creating illegal emissions and ensure they pay a heavy price for such offences; and hold those who allow illegal emissions to account, punishing them accordingly," Li said.

On corruption, Li reiterated Beijing's pledge to clamp down on the deep-seated problem President Xi Jinping has vowed to fight against.

"Our tough stance on corruption is here to stay; our tolerance for corruption is zero, and anyone guilty of corruption will be dealt with seriously. We will see to it that every instance of corruption, should it be committed higher up or lower down, is severely punished," he said.

— Reuters contributed to this story.