Re­form ‘ means slightly slower growth’

China Daily (Hong Kong) - - BUSINESS / VIEWS - By LI YANG liyang@chi­

An­a­lysts are is­su­ing their fore­casts for China’s 2014 out­look. Many be­lieve that GDP growth will be as strong as this year — or maybe a bit lower — as the na­tion car­ries out re­forms.

This year, GDP growth is likely to be 7.6 per­cent, just a touch above the of­fi­cial tar­get of 7.5 per­cent.

Global de­mand for Chi­nese prod­ucts is likely to im­prove in 2014, so the gov­ern­ment doesn’t need to make any deliberate at­tempt to push the growth rate back above 8 per­cent, an­a­lysts said.

Some key think tanks have al­ready sug­gested that the growth tar­get should be lower next year.

Zhu Bao­liang, a se­nior econ­o­mist with the State In­for­ma­tion Center, a gov­ern­ment think tank, warned that China must avoid re­peat­ing its mis­take of “blind pur­suit of growth”.

The center re­leased a re­port on Dec 2 say­ing that China should lower its growth tar­get to 7 per­cent to al­low for struc­tural changes.

The In­sti­tute of Eco­nom­ics at the Chi­nese Academy of So­cial Sciences has re­port­edly sug­gested that 7 per­cent GDP growth will be suf­fi­cient for China to com­plete its goals for the 12th Five-Year Plan (2011-15).

Zhou Xiaochuan, gov­er­nor of the Peo­ple’s Bank of China, the cen­tral bank, told a fo­rum in late Novem­ber that “steadi­ness” will be the econ­omy’s keynote for 2014. Another PBOC of­fi­cial, Vice-Gov­er­nor Yi Gang, said GDP growth will hover at about 7 per­cent for the fore­see­able fu­ture.

Sev­eral think tanks have called for a con­sumer price in­dex tar­get of 3.5 per­cent for next year and growth in M2 money sup­ply of 13 per­cent.

They said that China will main­tain a proac­tive fis­cal pol­icy (em­pha­siz­ing many gov­ern­ment-led in­vest­ment projects) and a pru­dent mone­tary pol­icy (cau­tious about credit cre­ation).

The ac­tual tar­gets will come out of the Cen­tral Eco­nomic Work Con­fer­ence, which opened on Tues­day in Bei­jing. Even those num­bers won’t be fi­nal un­til they’re ap­proved by the top leg­is­la­ture — the Na­tional Peo­ple’s Congress — in March as part of the pre­mier’s Gov­ern­ment Work Re­port to the law­mak­ers.

None­the­less, the sug­gested num­bers be­ing pro­posed by re­searchers close to the gov­ern­ment are use­ful, be­cause they de­fine the “com­fort zone” of the econ­omy, the range with which the gov­ern­ment feels most con­fi­dent.

The com­fort zone, ac­cord­ing to Zhang Shuguang, an econ­o­mist with the Bei­jing- based Unir­ule In­sti­tute of Eco­nom­ics, is for GDP growth to stay be­tween 7 and 7.5 per­cent. He gave that range in com­ments to the Se­cu­ri­ties Mar­ket Weekly.

Some an­a­lysts also be­lieve that with a stronger global econ­omy and ro­bust do­mes­tic ur­ban in­vest­ment, China will eas­ily achieve GDP growth some­what higher than 7 per­cent in 2014.

One rea­son China doesn’t need the dou­ble-digit growth rates of the past is it must change the eco­nomic growth model, re­searchers said.

Start­ing in 2014, poli­cies must be more spe­cific, whether they re­late to mone­tary pol­icy, the fi­nan­cial mar­kets or ur­ban de­vel­op­ment.

Just im­prov­ing the fis­cal sys­tem, a cru­cial as­pect of re­form, re­quires a daunt­ing se­ries of ef­forts, as sug­gested by the State In­for­ma­tion Center.

The ef­forts in­clude ex­pand­ing the size of the fis­cal deficit and gov­ern­ment debt, al­low­ing lo­cal gov­ern­ments to in­crease their tax rev­enues (es­pe­cially from taxes on con­sump­tion and prop­erty), strength­en­ing bud­getary con­trols and build­ing a stan­dard­ized and open mar­ket for lo­cal gov­ern­ment debt.

Few fore­casts have touched on the sub­ject of un­em­ploy­ment. For ex­am­ple, how will as many as 7 mil­lion col­lege grad­u­ates find jobs? Th­ese is­sues are yet to be se­ri­ously dis­cussed.

But they are top con­cerns for the lead­ers. As Pre­mier Li Ke­qiang said many times, the ur­ban job mar­ket is most sen­si­tive to GDP growth. If growth is slug­gish, it can be so­cially de­struc­tive. He said ide­ally, China should try to main­tain GDP growth of at least 7 per­cent from now to 2020.


A for­eign mer­chant looks over the goods at a fair in Yiwu, Zhejiang prov­ince. Global de­mand for Chi­nese prod­ucts is likely to im­prove in 2014, ac­cord­ing to ex­perts.

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