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Economic growth rate: 6.5 percent set as bottom line by central government
2015-11-04 15:19

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“13th Five-year Plan” Suggestion issued on Nov. 3 proposes that economy will keep medium and high growth rate. Based on improvements in balance, containment and sustainability, it is a goal that China’s GDP and per capita income of urban and rural residents will double up to 2020, when compared with 2010.

Chinese President Xi Jinping made instructions on Suggestion on Formulating 13th Five-Year Plan for National Economy and Social Development by the Central Committee of the Communist Party of China in the Fifth Plenary Session of the 18th Communist Party of China Central Committee meeting, and pointed out that annual average economic growth from 2016 to 2020 should be at least 6.5 percent in order to realize the said goal.

6.5 percent! It is a bottom line for economic growth in the“13th Five-year Plan” period set by the central government.

What does it mean?

There have been signals that 6.5 percent will be set as the bottom line for economic growth.
Chinese Premier Li Keqiang presented in welcome luncheon party in Seoul, Korea last weekend, and made a keynote speech that “China will realize a goal of comprehensively building up a well-off society up to 2020, requiring annual average economic growth of at least 6.5 percent in five years. Keeping medium and high growth rate is a goal set for China’s economic development.”

Xu Lin, director of Development and Planning Department of National Development and Reform Commission of the PRC, explained in the public for many times that annual average economic growth rate must be at least 6.5 percent, if we want to realize the said goal up to 2020 based on measurement and calculation that economic growth reaches 7 percent this year, which means that round 6.5 percent is a bottom line.

Zhang Liqun, macro economy researcher of Development Research Center of the State Council, pointed out in the SSN interview that “goals for development include a concept of range movement, which sets a bottom line and proper range for the growth. It means that macro adjustment and control during the ‘13th Five-year Plan’ period should focus on adjustment and control of its range. Meanwhile, it also reflects that we further deepen the cognition on economic movement.”

Compared with annual average growth of nearly 8 percent in the “12th Five-year Plan” period, economic growth rate in the “13th Five-year Plan” period will obviously slow down, but Chinese President Xi believes that “along with increasing economic aggregate, it is a basic rule to slow down the growth rate correspondingly.”

Additionally, it is worth to notice that the central government pays more attention to people’s livelihood, such as employment, education, social security, housing, medical treatment and etc., when compared with economic growth rate.

As Premier Li Keqiang has emphasized in various occasions, if employment rate keeps steady, a little bit higher or lower in GDP growth rate is acceptable.

President Xi Jinping stressed at the Fifth Plenary Session that during the “13th Five-year Plan” period, China should attach equal importance to growth rate, quantity and quality of economic growth, realize quality, efficient and sustainable growth without false components, and focus on transforming economic developing mode, optimizing economic structure, improving ecological environment and enhancing quality and efficiency of development.

6.5 pct: the bottom-line, not necessarily the target

6.5 percent is the bottom-line of economic growth in the next five years, but it is not necessarily the anticipated target.

 “To achieve the goal of doubled GDP by 2020, the economic growth rate during the “13th Five-year Plan” period should maintain moderate to high speed, which may range from 6.5 percent and 7 percent if a good environment will be created for economic transformation, with excessive and outdated capacity obsoleted and employment remains stable,” said Zhang Jun, chief economist at Morgan Stanley Huaxin Securities, “So I believe 6.5 percent is the bottom-line, which also implies the goal of 7 percent. It is only the target may not be realized, but the bottom-line can’t be broke”.

“Why does China lower its expectation, as it has the ability to maintain high speed growth?” Lian Ping, chief economist at Bank of Communications told SSN reporters. He believes 7 percent is an appropriate growth rate for the“13th Five-year Plan” period. “China still has potential to maintain high growth rate, because urbanization and reform could still create much room, and economic restructuring requires a relatively higher growth rate,” said Lian Ping.

Currently, major research institutes home and abroad widely believe China’s potential annual economic growth rate will range from 6 percent to 7 percent during the“13th Five-year Plan” period. But for senior officials in the central government, the expectation of economic growth could be more optimistic. President Xi Jinping said affirmatively at the Fifth Plenary Session that “it is possible for China to keep approximately 7 percent economic growth rate in the future”.

Why is central government so confident about economic growth potential? And where does the potential come from? Xu Shaoshi, chairman of the National Development and Reform Commission, has the answer. “From outside, global economy will benefit China’s growth; from inside, regional development, new-type urbanization and innovation drive are all impetuses,” said Xu.

Besides, Xu particularly emphasized an important factor: China has 1,300 million populations, 900 million labor forces, and over 70 million entities. Premier Li Keqiang has also stressed this factor quite often. In his word, it is “massive entrepreneurship, innovation by all”, which is referred to as the new engine of economic growth.
 Translated by Jelly Yi and Adam Zhang
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