[BEIJING] China's top leadership will meet on Tuesday for an annual gathering to map out economic and reform plans for the following year, and some influential advisers to the government are recommending it cuts its 2015 growth target to seven per cent.
China looks set to miss its growth target this year for the first time since 1999, and full-year growth is likely to be the weakest in 24 years. The government last cut its annual growth target in 2012, to 7.5 per cent from eight per cent that it had kept for eight years.
Sources said government-run think-tanks, which are influential in the decision-making process but do not wield power themselves, are planning to recommend Beijing reduce its official GDP growth target in 2015 to seven per cent, down from 7.5 per cent this year.
"President Xi (Jinping) has already hinted at the growth target when he said growth of seven per cent is the highest in the world," said a senior economist at the Chinese Academy of Social Sciences (CASS), who declined to be identified.
"I think it should be seven per cent if there are no more surprises. But it cannot be lower than seven per cent, otherwise there could be employment problems and debt default problems." China's reform-minded leaders have shown greater tolerance for slower growth, but they will have to tread carefully to avoid a sharper slowdown that could fuel job losses and debt default risks, analysts say.
The annual Central Economic Work Conference, which state radio said meets from Tuesday, may reiterate a prudent monetary policy, but the sources believe the underlying tone could be accommodative to ward off a sharp growth slowdown.
Economists expect policymakers to embark on their biggest easing campaign since the global financial crisis, forecasting a combination of more rate cuts and reductions in bank reserve requirements to encourage lending despite mounting bad loans.
After months of saying major stimulus wasn't needed, the central bank surprised markets on Nov 21 by cutting interest rates for the first time in more than two years to shore up growth and lift some of the pressure off debt-laden companies.
Several think-tanks have also suggested the government lower its target on consumer inflation to around three per cent from this year's 3.5 per cent, given falling commodity prices.
"We recommended a growth target of around seven per cent," said Zhu Baoliang, chief economist at the State Information Centre, a top government think-tank. "We suggested an inflation target of around three per cent. On employment, we should aim for 10 million new jobs," he said, adding that he recommended a quicker pace of reform in 2015.
The government may budget a deficit of nearly three per cent of GDP in 2015 from this year's 2.1 per cent, to allow local governments to sell bonds independently as they scale back fund-raising via local financial vehicles, sources said.
"We will close the back door, barring local governments from raising debt via special purpose vehicles, but we must open up the front door. We need to boost fiscal spending and expand the budget deficit as we need to stabilise growth," said the CASS economist.
The meeting, which sources said would run until Thursday, is unlikely to result in any public announcement of economic targets, which are usually reserved for the opening of the national parliamentary session in early March.
Adding to already gloomy data, analysts expect upcoming figures on investment and inflation to be similarly lacklustre, and the property market is likely to remain weak well into 2015, weighing on demand for everything from furniture and glass to cement and steel.
Reducing the growth target would be a natural reaction as Beijing moves to manage domestic expectations.
Top leaders could discuss ways to quicken economic reforms next year, including a fiscal overhaul to deal with the root cause of local government debt, and further financial market liberalisation, the sources said.