Xi Jinping has signaled a move away from China’s growth-at-all-costs approach, even eschewing repetition of a key expansion goal when he outlined his vision for the future last week. But old habits die hard.
China should scrap annual gross domestic product growth targets altogether, according to all but three economists of 17 who responded to that question in a survey by Bloomberg News Oct. 19 to 25. Yet none forecast leaders will do so.
Instead, they bet China will set a target for GDP growth of “about 6.5 percent” or “6.5 percent” in 2018, according to 12 of 18 analysts polled. Five project a range of 6 percent to 6.5 percent, and one sees 6.5 percent to 7 percent.
In a key speech last week outlining a road map to turn China into a global power by 2050, Xi omitted the commitment made by his predecessor to double the size of the economy by 2020 from 2010’s level. That spurred speculation there’d be more tolerance of a slower growth pace in the years ahead, helping policy makers focus on things like narrowing income gaps, taming financial risks and curbing pollution.
Such an omission helps to implement a new development strategy that prioritizes the quality over pace of economic growth, Yang Weimin, deputy head of the Office of the Central Leading Group on Financial and Economic Affairs, said Thursday.
“Lack of output is no longer the main problem in the economy. What’s the most acute issue then? It is the lack of quality in growth,” Yang told reporters at a briefing where a group of officials elaborated on the message of Xi’s speech. Xi has not mentioned any targets such as doubling the GDP in his roadmap for the next three decades, Yang said.
“Over the longer term, it might be better to drop growth targets, as that would give Beijing more leeway to focus on structurally crucial reforms and deleveraging,” said Arjen van Dijkhuizen, senior economist at ABN Amro Bank NV in Amsterdam. “On the shorter term, however, GDP growth targets have been helpful in keeping China’s slowdown gradual, which has benefited the world economy.”
All economists surveyed said China will be able to meet the target it sets next year. Perhaps that should be no surprise given its track record in doing so for decades.
China’s economy expanded 6.9 percent in the first nine months of this year, outpacing the target of 6.5 percent or better set in March.
Policy makers typically discuss the next year’s growth target at the Central Economic Work Conference, usually in December, and announce it at the National People’s Congress in March. Xi’s omission of Hu Jintao’s growth goal may help policy makers switch to implementing the new development plans.
Liu He, one of President Xi’s closest financial and economic advisers, was elevated to the elite 25-member Politburo, a move that may also presage a role in steering a new approach to financial regulation.
“A sharp drop in Chinese economic activity remains very unlikely,” said Frederik Kunze, chief China economist at German lender NordLB in Hanover. “Beijing’s policy makers aren’t focusing solely on GDP growth to evaluate and communicate the state of the economy. Hence, reaching ‘about 6.5 percent’ GDP growth would fit the economic agenda and would also provide substantial room to act.”