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China set to adopt 6.5-7% growth target range for 2016: sources
[BEIJING] China's leaders are expected to target economic growth in a range of 6.5 per cent to 7 per cent this year, sources familiar with their thinking said, setting a range for the first time because policymakers are uncertain on the economy's prospects.
The proposed range, which would follow a 2015 target of "around 7 per cent" growth, was endorsed by top leaders at the closed-door Central Economic Work Conference in mid-December, according to the sources with knowledge of the meeting outcome.
The world's second-largest economy grew 6.9 per cent in 2015, the weakest in 25 years, although some economists believe real growth is even lower. "They are likely to target economic growth of 6.5-7 per cent this year, with 6.5 per cent as the bottom line," said one of the sources, a policy adviser.
Policymakers, worried by global uncertainties and the impact on growth of their structural economic reforms, struggled to reach a consensus at the December meeting, the sources said.
The State Council Information Office, the public relations arm of the government, had no comment on the growth forecast when contacted by Reuters.
The floor of 6.5 per cent reflects the minimum average rate of growth needed over the next five years to meet an existing goal of doubling gross domestic product and per capita income by 2020 from 2010.
The 2016 growth target and the country's 13th Five-Year Plan, a blueprint covering 2016-2020, will be announced at the annual meeting of the National People's Congress, the country's parliament, in early March.
Although the target range was endorsed by the leadership in December, it could still be adjusted before parliament convenes.
"The government will not be too nervous about growth this year and will focus more on structural adjustments," said a government economist. "Growth may still slow in the first and second quarter and people are divided over the third and fourth quarter. The full-year growth could slow to 6.5-6.6 per cent."
A string of cuts in interest rates and bank reserve requirements since November 2014 have failed to put a floor under the slowing economy. Beijing is expected to put more emphasis on fiscal policy to support growth, including tax cuts and running a bigger budget deficit of about 3 per cent of GDP.
China's leaders have flagged a "new normal" of slower growth as they look to shift the economy to a more sustainable, consumption-led model.
About half of China's 30 provinces and municipalities have lowered their growth targets for 2016, while nearly a third kept targets unchanged from last year, according to local media.
Guangdong and Zhejiang provinces have set a growth target of 7-7.5 per cent this year, while Jiangsu and Shandong are aiming for growth of 7.5-8 per cent.
In 2015, growth in Chongqing municipality was 11 per cent, the fastest in the country, while growth in Liaoning province in the rustbelt northeast, was 3 per cent, the country's lowest.
For this year, Chongqing is eyeing 10 per cent growth and Liaoning is aiming for 6 per cent.
At the enclave in December, leaders pledged to make monetary policy more flexible, expand the budget deficit to support the economy, and push forward "supply-side reform".
The central bank may be reluctant to cut interest rates or banks' reserve requirement ratios in the near term because of concerns over the impact on the yuan, but it remains under pressure to loosen policy further, policy insiders said.
"We think the central bank should ease policy, because China is a big economy and its monetary policy should focus on its own economic conditions," said the government economist.