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BEIJING(MNI) - China may target 2020 growth in a range between 5.5% and 6%
and signal that it could tolerate inflation target above 3% as the coronavirus
outbreak adds to already strong headwinds, sources close to policy makers told
The first quarter may see growth halved to 3% from 6% in Q4, and the
epidemic is likely to remain a drag on activity into March, said a source asking
not to be named, noting that the country only needs to grow by 5.6%-5.7% this
year to reach the goal of doubling GDP from 2010, thanks to upwards revisions of
previous years' growth.
The National Bureau of Statistics said last month that economic growth for
each year between 2014 and 2018 had been revised up by 0.1 percentage point.
This year's growth target had been set to be announced during the National
People's Congress on March 5, but the event has been postponed due to the
While production and consumption should be largely back to normal by Q2,
stimulus will still be needed, especially via investment, the source said. The
investment focus will shift to new infrastructure, including in areas such as
education and healthcare, which should help bolster future consumption, he said.
Policy makers are also likely to set up a higher threshold for maximum
inflation this year, considering the lingering effect on pork prices of African
swine fever and the supply-side hit from measures to contain the virus,
according to a second policy advisor, who also requested anonymity. Greater
tolerance for inflation would not be likely however to prompt the People's Bank
of China to further relax its moderate easing bias, the source said.
The restoration of production following virus disruption has been slower
than expected in early February, both sources said. February could see a GDP
contraction on a monthly basis, the second source said, with production only
back to 30%-40% of capacity. An optimistic scenario might see output back to 80%
levels by the end of March, said the second source, who saw Q1 growth at
--CONSUMPTION TO RECOVER MORE QUICKLY
Zhong Nanshan, a prominent scientist leading a panel of experts to help
control the coronavirus outbreak, said on Thursday in a briefing that China is
confident of controlling the virus by the end of April.
Supply disruption should keep inflation at relatively high levels in the
short term, as consumption should recover more quickly than production, the
second source said, noting that pork prices remain elevated.
China set its inflation target at "around 3%" for 2019, when the actual
rise in prices came in at 2.9%. Consumer price inflation jumped to an eight-year
high 5.4% on an annual basis in January. The rate of increase in CPI should
soften this month, due to a base effect with 2019, when Chinese New Year fell in
February, although it should jump again in March as consumption rebounds, the
The fact that inflation has been fuelled by supply-side disruption will
mean that it only curbs rather than impedes PBOC easing, a third source said.
Authorities will be particularly concerned about unemployment, with so many
factories idle, the advisors said.
Keeping surveyed urban unemployment below the targeted ceiling of 5.5%
might not be possible if growth falls short of 6%, the third source said. The
indicator, introduced in 2018, rose to 5%-5.3% last year, up from 4.8%-5.1% in
2018. Officials will have to bail out struggling companies in the small business
sector, which provides 80% of jobs, to avoid large-scale bankruptcies, the
--MNI London Bureau; +44 203 865 3829; email: email@example.com