2018 growth goal to stay unchanged: sources

Leadership eager to avoid any crisis resulting from leverage issue

China will keep its target for economic growth at “around 6.5 percent” in 2018, unchanged from last year, policy sources told Reuters, as it seeks to balance efforts to reduce debt risks while keeping the world’s second-largest economy stable.

The proposed target, to be unveiled at the annual two sessions to be held in March, was endorsed by top leaders at the Central Economic Work Conference held from December 18 to 20, according to four sources with knowledge of the meeting’s outcome.

Where the policymakers set the speedometer on their closely managed economy is always of crucial interest to global investors because of China’s role as an engine of growth for the world.

Past stimulus policies to stop growth flagging as the global economy passed through a sticky few years resulted in massive borrowing by State-run firms and local governments.

Total debt in the second quarter of last year amounted to 255.9 percent of GDP, according to Bank for International Settlements estimates.

And policymakers are on a mission to reduce the risk of any crisis erupting out of the mountain of debt.

“The economic growth target will still be around 6.5 percent as they favor stability,” said one source who requested anonymity due to the sensitivity of the matter.

China’s State Council Information Office, the government’s public relations arm, had not yet responded to request for comment on the economic targets for this year.

There have been some doubts about whether China would be putting a number on its target for 2018, as the country has pledged to pursue “high-quality growth.”

Analysts expect final numbers will show the economy grew around 6.8 percent in 2017, beating the target thanks to strong global demand for Chinese exports, and just bettering the 26-year low of 6.7 percent posted in 2016.

To hit the 2020 goal of doubling GDP, the economy needs to expand by at least 6.3 percent annually over the next three years, officials have said.

The government will maintain a 3 percent inflation target for 2018, the sources said, suggesting policymakers are not foreseeing any sharp price rises, as factories struggle to pass on higher costs to consumers.

November consumer inflation slowed to 1.7 percent, while producer price rises eased to a four-month low of 5.8 percent.

The IMF and some economists have urged China to do away with growth targets to reduce the economy’s long reliance on debt-fueled stimulus.

“We should have a data system that puts more emphasis on high-quality growth, but scrapping growth targets completely would go too far,” said one of the sources.