Discussion on setting GDP target continues
December 5, 2017 Category China News Round-up, Weekly
After President Xi Jinping failed to mention any long-term GDP growth targets in his Party Congress report in October, Chinese economists are debating whether Beijing should keep or do away with its annual expansion goal. While Xi is playing down GDP to shift focus to efficiency, fairness and the environment, it is unclear whether the government is ready to give up its tradition of setting a target. Jia Kang, former head of the Research Institute at the Ministry of Finance and a government adviser, told the annual conference of Caijing Magazine it was “unimaginable” for China to set aside its GDP target entirely. For the past two decades, the annual target has served as a minimum growth rate. From 1987 to 2016, the target was missed only twice – in 1989 and in 1998.
Michael Pettis, Professor of Finance at Peking University’s Guanghua School of Management, said that the omission of a growth target in Xi’s report was “a good sign to start with”, sending a strong message to the country’s local cadres to stop piling up debt. “The first signal from Beijing that it will rein in credit would be to give up the GDP growth target, because the GDP growth target locks the country into surging debt,” said Pettis.
China should set a moderate economic growth target next year to give more room to structural reform, according to Bai Chongen, Tsinghua University Professor and Member of the People’s Bank of China’s Monetary Policy Committee. China’s economy maintained steady growth and a positive outlook this year, with many bright spots emerging, including markedly improved corporate profits, he said. While some advocate a higher GDP growth target for 2018, Bai said a slightly lower target is needed to curb inefficient investment and reduce the risk from growing debt. “Personally I support a slightly lower, moderate growth target, so that we have more room to carry out structural reform,” he said during a panel discussion at the Caijing Annual Conference.
The government targeted GDP growth of around 6.5% for 2017. The 2018 growth target is set to be unveiled during the annual session of the National People’s Congress in March next year. “To achieve the official goal of doubling the GDP by 2020 from 2010, the country only needs an average growth rate of 6.3% in the coming three years,” Bai said. Pursuing a higher growth target could encourage upstream industries to continue expansion and lead to new excess capacity, he warned.
China’s economy expanded 6.8% year-on-year in the third quarter, down from 6.9% in the second quarter. Growth in the first three quarters reached 6.9%.
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