Gavekal Research expects China to abandon GDP growth targets
August 7, 2017 Category Macro-economy, Weekly
The Chinese government will likely drop its annual gross domestic product (GDP) target after the Communist Party of China’s 19th Party Congress this autumn, Louis-Vincent Gave, Co-founder of Gavekal Research, told a Hong Kong briefing, because it is increasingly costly for China to pursue a headline growth rate at the cost of delaying much-needed structural reforms. Although the move could slow down short-term growth, it could promote longer-term sustainable growth, he said. “The 6.5% growth target, you can still achieve it, but at a higher and higher cost. So why would they want to keep doing that?” Gave said. Debates have been going on for years over whether China should keep its annual growth target. Many economists have said the yearly practice of setting a growth target is a legacy from the era of the planned economy and should be scrapped. Others have argued in favor of maintaining targets, pointing out that China must maintain annual average growth of 6.5% through 2020 if it is to achieve its strategic goal of doubling per capita GDP over 10 years starting in 2010. Under the current practice, the Premier announces a yearly growth rate at the yearly session of the National People’s Congress in early March. The 2017 rate was set at “about 6.5%”, and China’s actual economic growth in the first half was 6.9%, the South China Morning Post reports.
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