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--Government Will Do Away With Annual Growth Targets From 2020
--But Whether To Ditch Growth Targets for 2018 and 2019 Still Under Discussion
By William Bi
BEIJING (MNI) - The Chinese government announced Thursday that it will do
away with annual GDP growth targets starting in three years, but leaving open
the possibility that the end of such targets could come sooner.
Policy-planners will "no longer mention targets like doubling the GDP" when
mapping out long-term goals, Yang Weimin, deputy head of the Central Finance
Leading Group, said in remarks interpreting Xi Jiping's report delivered last
week at the 19th Communist Party Congress, which concluded on Tuesday. The group
is the direction-setting body for China's economic policies, led by Xi himself.
Yang deemphasized the GDP targets while reading out his remarks on the
government's "two-step approach" for economic development in the decades beyond
That left unanswered how the government will manage the transition between
now and then. When stopped by reporters on his way out of the press room, Yang
said "next year and the year after are still under discussion."
"Society's major contradiction has changed," Yang said while on podium,
echoing Xi's much-touted assertion that "the principle contradiction" was
unbalanced growth rather than lack of output. "The most acute issue is lack of
quality" in the economy, according to Yang.
Yang did identify "three big battles" that must be won by 2020, when China
can declare it has formally met the vague definition of being a "moderately
prosperous" society: preventing "major risks," surging debt and speculative
investment, reducing poverty and curbing pollution.
As many noted, the Congress's objective was bureaucratic reshuffling, and
those looking for any clarity on policies must wait until December at the
earliest, when the first Central Economic Work Conference under the new team
will be held, setting economic policies for next year.
Precedents suggest the government will be flexible when it comes to
changing goals and priorities.
During his first administration, President Xi abandoned plans to let the
market play a bigger role in economic reforms as originally set out in the last
congress, ramping up government investment when growth stalled and restricting
capital flows when financial stability was threatened.
Given recent data showing the economy grew by 6.9% in the first three
quarters of the year, it is certain growth will end the year well beyond the
government goal of 6.5%. This has emboldened officials' projections about the
economic outlook, with People's Bank of China Governor Zhou Xiaochuan saying
last week that growth would accelerate to 7% in the second half.
The rating agency Fitch said strong growth so far this year has been helped
by a rebound in exports that won't last into next year. And both the momentum
from property market investment and government infrastructure spending are
expected to fade.
That suggested the government may still resort to pro-growth policies to
prop up an annual expansion rate of 6.0% to 6.5% until GDP meets the goal in
2020: doubling from 2010.
So while regulators will increase their vigilance on shadow banking and
other financial risks, economic leverage will continue to rise and
state-owned-enterprise reform will proceed only slowly.
The 19th party congress may project a turning point in reform and
transformation, but a more likely scenario is that the status quo will be
maintained, and reform will be gradual, until the next decade.
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