MNI: Ex-PBOC Chief Economist: China Should Ditch GDP Targets

     BEIJING (MNI) - China should ditch its usual practice of setting annual

growth targets and instead opt for a system of monitors for local governments,

said Ma Jun, former chief economist of the People's Bank of China. 

     The recommended measure can help rein in local government borrowing, limit

further gain in leveraging and prevent false reporting by local officials, Ma

said in a report emailed to MNI. Ma made the remark at a conference in Tsinghua

University, where he heads a financial research office.

     China's setting an annual GDP growth goal has fueled a debt growth in the

past decade, complicating efforts by the central government to control financial

risks, Ma said. The hard targets also forced local officials to resort to

creating financing vehicles to raise money and boost growth, Ma said.

     "The key challenge is how to control the impulses of local governments and

state-owned companies to raise debt to no limit, which comes from the pressure

under a GDP target," the report cited economists attending the meeting said.

Merely reforming regulations over the financial sector cannot root out the

risks, they said. 

     Given China's tightening labor supply, further stressing GDP growth rate

conflicts with the economy's main goal, which is to ensure employment and

maintain social stability, according to the report.

     Instead of setting a specific target for annual GDP growth, China should

manage its employment stability by keeping urban unemployment rate at 4.5-5.5%,

Ma suggested. That prevents the needs for stimulus, credit expansion or a hike

in leverage ratios, he said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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