“China has set its GDP growth target at around 6.5 percent for 2017, and will pursue better results in actual economic work. Consumer prices will grow at around 3 percent. Over 11 million urban jobs will be created and the registered urban unemployment rate will be controlled within 4.5 percent.” The government work report set major targets in the economic and social development in 2017. As for the key concern about GDP growth, many experts indicated that the target meets the market expectation and actual conditions. It will provide more space for deepening reform.
It “actively” lowers the target for the first time
What does “around 6.5 percent” mean?
Based on actual performance, the economic growth reached 6.7 percent and over 13 million jobs were created in 2016.
As for the growth, it was 7 percent in 2004 and was adjusted to around 8 percent in 2005. It remained unchanged from 2006 to 2011. It was adjusted to around 7.5 percent in 2012 and around 7 percent in 2014 and 2015. In 2016, it was set at 6.5 percent to 7 percent. It is the first time that China “actively lowered” the GDP growth target to around 6.5 percent.
“The determination of the economic growth target in 2017 is a repeated gaming process with arguments from various parties. The adoption of the expected “around 6.5 percent” maintained certain flexibility and met actual conditions as well as economic functioning rules. Niu Li, director of the Economic Forecast Department of the State Information Center, indicated that the supply-side reform has shown results since last year with many economic indicators showing better conditions, increasingly stable economic operation and improved market expectations. All these show that there are grounds for the achievement of the economic target for this year.
It is noteworthy that it added “(China will) pursue better results in actual economic work” after the GDP growth target in the government work report. It means that the 6.5 percent growth is the “bottom line” rather than a “pivot”, indicated Deng Haiqing, chief economist of JZ Securities. Unlikely the “forced lowering” due to the slowing down of GDP growth in 2012 to 2016, the lowering of the GDP growth target is an “active lowering”. It has essential distinction with the view that “China lowered its GDP growth target as the Chinese economy will see further downward pressure”.
“A growth of around 6.5 percent is quite loose with potentials”, indicated Li Daokui, director of the Center for China in the World Economy, Tsinghua University.
It meets the actual conditions and stabilized expectation
How is “around 6.5 percent” determined?
According to the report submitted to the National People’s Congress by the National Development and Reform Commission (NDRC), firstly, it meets actual conditions; secondly, it meets the requirements in achieving the goal of building a moderately prosperous society in all respects; thirdly, it meets the requirements of the employment target; and fourthly, it will help stabilize the social expectation.
It should point out that the total economic output reached over 74 trillion yuan in 2016. The increase with an expected growth of around 6.5 percent will exceed the increase at 6.7 percent in 2016. It represents a high speed compared with major countries in the world.
The growth target is also consistent with the targets in the “13th Five-year Period” plans. On the basis of a 6.7 percent growth in 2016, it can achieve the target of doubling the GDP in 2010 by 2020 with an annual average growth of around 6.5 percent in the following four years.
Niu pointed out that despite the slower growth target after the adjustments to the economic structure, the increase in employment targets will bring more economic benefits.
As a matter of fact, the GDP growth target of 6.5 percent is consistent with the market expectations. The International Monetary Fund, the World Bank and other international organizations forecasted the growth in their reports.
“The growth target is determined based on the internal and external environment as well as social demands”, indicated Niu. The new normal of China’s economic growth is characterized by a medium-high growth of 6 to 8 percent, which is determined by the stage of economic development and the process of industrialization. The current expected macro-economic target meets actual conditions.
It will facilitate deepening reform
What will happen after the setting of the target of “around 6.5 percent”?
China lowered the economic targets to solve the uncoordinated real economies and virtual economies to certain extent. The financial and property industries made more contributions to the economic growth in 2015 and 2016. They even contributed around 17 percent to the economic growth in 2016.
It means that the setting of the economic growth target is to focus on solving structural problems in economic growth.
“The target means a change in the trend of the supply-side reform. It will guarantee the quality and adjust the structure rather than only seeking economic growth. It will give priority to the economic quality and restructuring compared with the economic growth”, indicated Deng.
“The government will be passive and even by bounded by the GDP growth target if it has to guarantee a certain growth. The current target is relatively loose. It can further promote restructuring and reform without significant economic fluctuations”. Niu believed that it will facilitate the coordination and balance among other aspects while keeping the economic growth at an appropriately reasonable level.
Translated by Star
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