MNI EXCLUSIVE: China Growth Seen At 8%+ In 2021

China could grow by 8% this year although the government may avoid specifying an explicit target and focus instead on job creation and debt control at key annual meetings next week, policy advisors told MNI.

Following hints from national authorities, local governments have set growth targets above 6%, in line with potential, so that would be a bottom line for overall output, said Xu Hongcai, deputy director of the Economic Policy Commission of the China Association of Policy Science. Chinese GDP could expand more than 8% this year with the rate slowing to about 6% in Q4 from over 15% in Q1, he said.

A work report to be released by Premier Li Keqiang during the opening ceremony of the 13^th National People's Congress on March 5 will set targets for inflation, employment, and possibly, emission reductions, given China's goal to become carbon neutral by 2060. Advisors expect the government will aim for consumption to continue to drive recovery, supported by prudent monetary policy and proactive fiscal policy.

While the announcement of a growth target has been the highlight of past reports, setting a number would be meaningless this year due to the base effect comparison with pandemic-hit 2020, said Wang Jun, an academic committee member at the China Center for International Economic Exchanges.

This year's Two Sessions meetings, of the NPC and the Chinese People's Political Consultative Conference beginning on March 4, coincide with the start of the 14th Five Year Plan. This will also likely avoid any formal growth target, but goals for key sectors, such as energy consumption and urbanisation, will depend on China growing by about an annual average 5.5% over the period, a high-ranking policy advisor who participated in discussions ahead of previous workings report told MNI.

JOBS GROWTH

Authorities want consumption to remain China's growth engine, but advisors caution its strength will depend on demand for housing and cars.

The government is likely to call for the creation of 10 million new jobs, one million more than last year, an objective which Xu said would not be easy to achieve and would depend on the recovery of small businesses.

Authorities are less focussed on inflation this year, although they are increasingly concerned by the dangers of potential asset price bubbles, Xu said. Advisors expect the policy agenda to aim for slower growth in the money supply and credit, as the central bank stabilises leverage and fiscal spending is constrained by revenue pressure.

Consumer prices may rise by only 1-1.5% this year, well below the 3% maximum likely to be set by policymakers, said Wang, pointing to an excess of domestic supply over demand and tame prices for food, which makes up a large proportion of the CPI basket.

EXPECTATIONS

Investment is likely to be seen growing at 6.5% y/y as manufacturing outperforms recent forecasts and companies expand amid higher prices for upstream industrial products, Wang said. Vaccine exports could help boost total export growth to 5-10% while consumption could expand by as much as 15% due to the low-base effect, he added.

Urbanisation will be a key driver of growth for the next five years, Xu said. China's urbanisation rate will rise one percentage point per year in the next 15 years and reach 75% by 2035, he said.