China's new growth tar­get re­al­is­tic: HSBC

The Pak Banker - - COMPANIES/BOSS -

BEI­JING: China's new GDP growth tar­get for 2016 was re­al­is­tic and con­sis­tent with its po­ten­tial growth strength, de­spite the cur­rent eco­nomic slow­down, ac­cord­ing to a HSBC re­search re­port on Thurs­day. China set this year's eco­nomic growth tar­get at be­tween 6.5 and 7 per­cent, and the av­er­age an­nual growth rate for the next five years at above 6.5 per­cent, on Satur­day dur­ing the na­tional leg­is­la­ture's an­nual ses­sion. The new tar­get comes as the Chi­nese econ­omy posted its slow­est eco­nomic ex­pan­sion in 25 years last year, while other in­di­ca­tors point to fur­ther weak­ness.

"While the tar­gets are am­bi­tious, we don't think they are un­re­al­is­tic," said the re­port, as HSBC still has con­fi­dence in sup­ply side re­form and the pol­i­cy­mak­ers' fa­cil­ity to boost de­mand. "While China's po­ten­tial growth is no longer in dou­ble-dig­its, we es­ti­mate that it is still at least 7.5 per­cent," the re­port said, adding that the govern­ment had suf­fi­cient pol­icy op­tions avail­able to boost do­mes­tic de­mand and bring growth closer to its po­ten­tial.

Chi­nese lead­ers have stated that the econ­omy has en­tered a "new nor­mal" of slower growth as they are work­ing to re­place a worn-out growth model based on trade, in­vest­ment and heavy in­dus­try with sus­tain­able ex­pan­sion driven by con­sumer spend­ing and en­trepreneur­ship. To ar­rest the eco­nomic down­turn dur­ing the tran­si­tion, China cut the bench­mark in­ter­est rates and re­serve re­quire­ment ra­tio (RRR) for banks sev­eral times last year. Fur­ther cuts to the in­ter­est rates, by 50 ba­sis points, and the RRR by 350 ba­sis points, will be likely this year, the re­port said. HSBC ex­pects China to put more em­pha­sis on fis­cal pol­icy this year to sup­port growth, as the govern­ment raised the bud­get deficit to 3 per­cent of GDP in 2016, from 2.3 per­cent in 2015.

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