China set to adopt 6.5-7% growth target range for 2016

BEIJING: China’s leaders are expected to target economic growth in a range of 6.5 percent to 7 percent this year, sources familiar with their thinking said, setting a range for the first time because policymakers are uncertain on the economy’s prospects. The proposed range, which would follow a 2015 target of “around 7 percent” growth, was endorsed by top leaders at the closed-door Central Economic Work Conference in midDecember, according to the sources with knowledge of the meeting outcome.

The world’s second-largest economy grew 6.9 percent in 2015, the weakest in 25 years, although some economists believe real growth is even lower. “They are likely to target economic growth of 6.5-7 percent this year, with 6.5 percent as the bottom line,” said one of the sources, a policy adviser. Policymakers, worried by global uncertainties and the impact on growth of their structural economic reforms, struggled to reach a consensus at the December meeting, the sources said.

The State Council Information Office, the public relations arm of the government, had no comment on the growth forecast when contacted by Reuters. The floor of 6.5 percent reflects the minimum average rate of growth needed over the next five years to meet an existing goal of doubling gross domestic product and per capita income by 2020 from 2010.

The 2016 growth target and the country’s 13th Five-Year Plan, a blueprint covering 2016-2020, will be announced at the annual meeting of the National People’s Congress, the country’s parliament, in early March. Although the target range was endorsed by the leadership in December, it could still be adjusted before parliament convenes. “The government will not be too nervous about growth this year and will focus more on structural adjustments,” said a government economist.

“Growth may still slow in the first and second quarter and people are divided over the third and fourth quarter. The fullyear growth could slow to 6.5-6.6 percent.”

POLICY SUPPORT A string of cuts in interest rates and bank reserve requirements since November 2014 have failed to put a floor under the slowing economy. Beijing is expected to put more emphasis on fiscal policy to support growth, including tax cuts and running a bigger budget deficit of about 3 percent of GDP. China’s leaders have flagged a “new normal” of slower growth as they look to shift the economy to a more sustainable, consumption-led model. — Reuters