MNI EXCLUSIVE: No China GDP Target But Still Need 5-6% Growth

China still needs GDP growth of more than 5% a year from 2021 to 2025 to support employment and quality development, policy advisors in Beijing insist, despite the latest plenum of the Communist Party eschewing a specific growth rate for the next-five-year plan after the annual target was dropped this year amid Covid uncertainty.

According to the communique released Thursday after the Fifth Plenary Session of the Communist Party, the country will focus on quality and efficiency rather than any explicit pace of growth, with China aiming to pull its per capita output levels up to that of moderately developed countries by 2035.

There is less necessity to target a high rate since the current level of expansion is in line with the potential growth rate and the economic situation is basically stable, said Liu Xiangdong, deputy director of Economic Research at China Center for International Economic Exchanges. He noted that the economic uncertainty created by the pandemic could still upset any precise targeting of growth.

Liu estimated that China's potential growth rate falls into a 5% to 6% range and, if this pace of expansion could be maintained over the next 15 years, the country can raise its per capita GDP to USD 15,000-20,000 by 2035 to overcome the middle-income trap.

Zhu Baoliang, chief economist at the economic forecasting department of the State Information Center, predicted that the potential rate of growth during the period of 2021-2025 would be 5.7%, which would have made an annual target of about 5.5% appropriate.

NO LET UP

Advisors speaking to MNI believed that some quantified targets would still be needed to coordinate efforts to boost the domestic economy while countering global uncertainties. According to Ning Jizhe, vice chairman of the National Development and Reform Commission, the NDRC will put forward quantitative targets and specific indicators to underpin the broader aims contained in the country's 14th five-year plan.

Meanwhile, Yu Yongding, a senior fellow of the Chinese Academy of Social Sciences, asserted that "China needs at least 5-6% growth (for the next five years) to further narrow the gap with the U.S."

This growth rate should be achieved through both monetary and fiscal expansion, and it is too early to talk about normalizing policies, according to Yu, a former member of the PBOC's monetary policy committee, who noted that GDP growth had almost halved to 6% in 2019 from 11% in 2010. Employment, a measure constantly reiterated by policy makers, also required China to remain at a certain level of growth rate.

GROWTH DRIVERS

China's new "dual-circulation" growth model, which promotes the domestic market while the world's second largest economy continues to engage with foreign markets, is "an important starting point" for the plan, said Xu Qiyuan, director of the Economic Development Division at the Institute of World Economics and Politics under the China Academy of Social Sciences.

"Two main issues that need to be considered in the next five years would be upgrading industry and ensuring the safety and resilience of the industrial chain," said Xu. The plan will also highlight fairer wealth distribution and may include improvements to fiscal transfer payments and taxation reforms.

The plan is expected to be finalised next spring by the National People's Congress, a legislature that grants pro forma approval to party policy.