China likely to maintain 6.5pc growth target

BEIJING: China’s leaders are likely to maintain this year’s growth target of “around 6.5 per cent” next year, even as they ratchet up efforts to prevent a destabilising build-up of debt in the world’s second-largest economy, according to policy sources.

Policymakers will be under pressure to balance efforts to tackle debt with the need to keep growth on a steady path, they said. Investor concerns over a crackdown on debt was highlighted last week when a sell-off in bonds spread to the stock market.

Top policymakers are expected to gather next month for the annual Central Economic Work Conference, which investors watch closely for policy priorities for the year ahead.

“Next year’s growth target could be similar to this year’s,” said a source. “It’s okay as long as we are able to secure growth of 6.5 per cent.”

President Xi Jinping said at the Communist Party Congress in October that China must defuse “major risks” in the economy, and fight poverty and pollution.

But he is also committed to meeting a goal set by the previous administration of doubling gross domestic product in the decade to 2020, to turn China into a “modestly prosperous” nation.

That means that growth needs to be around 6.5 per cent in each of the next three years.

The urgency to address debt and property risks was highlighted by a warning on the sidelines of the congress from the central bank chief, Zhou Xiaochuan, of the risk of a “Minsky moment” — a reference to a sudden collapse in asset prices after long periods of growth fuelled by debt.

“Growth cannot be too low as we still need to build a modestly prosperous society as outlined at the party congress,” said a source.

China's economy grew 6.7 per cent last year, a 26-year low, and was targeted to grow around 6.5 per cent this year. But it has grown at an annual 6.9 per cent in the first three quarters on strong demand for Chinese exports and sustained state spending. Reuters