China will not set a goal of doubling its gross domestic product starting in 2021 so it can focus more on higher-quality, long-term growth, a senior Communist Party official said, in a break from past practice.
The world’s second-largest economy is well on track to hit its target of doubling GDP and per capita income by 2020 from 2010, and market speculation over new targets had intensified in the run-up to the twice-in-a-decade Communist Party congress that ended on Tuesday.
While China’s pursuit of strong growth targets over the years has helped lift the global economy from recession after the financial crisis, its corporate and local government debt has soared, regional economic disparities have widened and environmental damage has worsened.
Yang Weimin, vice minister of the Office of the Central Leading Group on Financial and Economic Affairs, told a news conference in Beijing on Thursday that China will not solely pursue economic expansion and will emphasise the quality of its growth.
The shift away from ambitious long-term government growth targets is a departure from past practice in China, and marks a new strategy for longer-term economic development.
In the opening speech of the 19th party congress last week, President Xi Jinping did not explicitly mention the goal of doubling GDP by 2020. Throughout the gathering, there were also no public announcements about new economic growth targets.
Instead, Xi set broad long-term goals for China’s development “in a new era”, envisioning it as a modern socialist country by 2035, and a modern socialist “strong power” with leading influence on the world stage by 2050.
Obsessing less about targets could give policymakers more room to press ahead with painful, structural reforms — in theory — at the risk of weighing on domestic and global growth.
The International Monetary Fund (IMF) and many economists have urged Beijing to do away with or lower official growth targets altogether to reduce the country’s long reliance on debt-fuelled stimulus and encourage more productive investment.
The IMF warned this year that China’s credit growth was on a “dangerous trajectory” and called for “decisive action”, while the Bank for International Settlements said in late 2016 that excessive debt growth was signalling a banking crisis in the next three years.
At the start of the congress, Xi said China would deepen economic and financial reforms and further open its markets to foreign investors as it looks to move from high-speed to high-quality growth.
TARGETS, TARGETS, TARGETS
China’s economy grew 6.7 percent last year, the slowest in 26 years, and the government has targeted expansion of around 6.5 percent this year.
Most economists, however, expect it will beat this year’s goal, buoyed by strong government infrastructure spending and record lending by state banks.
The economy is now likely to expand 6.8 percent in 2017, accelerating for the first time in seven years, a Reuters poll showed.
Analysts believe the government will continue to set annual growth targets through to 2020, and they expect next year’s target to again be set at around 6.5 percent.
“Macro economic policies will focus more on employment, income growth and international balance of payments,” said Tang Jianwei, senior economist at Bank of Communications in Shanghai.
Vice Minister Yang told reporters that the 2020 GDP target remained in place, and that the government may still set an annual growth target for next year.
Yang said China will focus on preventing “major risks” in the economy, fighting poverty and pollution by 2020.
It is unclear if the government will scrap its annual growth target from 2021.
“What we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life,” Xi at the start of the party congress.
That was a redefinition of the late Chinese leader Deng Xiaoping’s so-called “principal contradiction” faced by Chinese society.
Deng said in the 1980s that China’s backwardness and low productivity were in conflict with the growing material needs of its people.
In his vision for China, Xi said prosperity for all would be achieved by 2050.
Source: Reuters (Reporting by Ben Blanchard; Writing by Kevin Yao and Ryan Woo; Editing by Jacqueline Wong, Sam Holmes and Kim Coghill)