MNI POLICY: China Should Abandon GDP Target: PBOC Advisor

China should permanently abolish the GDP growth target and focus on stabilizing employment and controlling inflation as the main goals for its macroeconomic policies, Ma Jun, a member of the Monetary Policy Committee of the People's Bank of China, said in a recent event hosted by the China Wealth Management 50 Forum.

GDP should not be used as an indicator for evaluating the performance of local officials, even if it is useful for forecasting revenue and expenditure or projecting investment, said Ma.

He warned that continuing to set GDP growth target could increase the risk of implicit local debts as local authorities may keep borrowing to drive investment.

China needs to carefully adjust its monetary policy given the fast-rising macro leverage ratios, and there are signs that bubbles have emerged as evidenced by stock market and housing price gains, Ma said. Inflation will be modest this year, leaving room for a slow adjustment in monetary policy, he said. M2 growth should be controlled at about 9% this year.

Ma said that business profits should greatly improve this year, reducing dependence on debt financing, and general fiscal deficit will fall, exerting less pressure on monetary expansion.