China considers GDP target of about 5% in pro-growth shift

SENIOR Chinese officials are debating an economic growth target for next year of around 5 per cent, as Beijing shifts gears toward bolstering the recovery, anonymous sources said.  

Some officials argue that setting a goal at a relatively high level would help local governments shift the focus of their work away from Covid controls to boosting the economy, the sources said. Other officials are concerned that a target of around 5 per cent could be too ambitious. 

Beijing is adopting a more pro-growth stance, now after months of economic turmoil triggered by record Covid outbreaks and a property market crisis – a downturn underscored on Wednesday (Dec 7) by the worst monthly trade data in more than two years. 

The Communist Party’s Politburo, its top decision-making body, said that it will seek a turnaround in the economy next year, and significantly boost market confidence. The comments came hours before the government announced a significant easing of Covid restrictions.

“Growth is clearly more important for the leaders now,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management. A growth target of about 5 per cent “would be a signal to send this message to the public and local officials”, he said. 

The gross domestic product (GDP) target will likely be discussed at the Central Economic Work Conference, which usually takes place within a week of the Politburo’s December meeting. The GDP goal itself will be disclosed only at the annual legislative meeting in March.

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The National Development and Reform Commission, the country’s economic planning agency, did not immediately respond to a fax seeking more information.

The benchmark CSI 300 Index closed 0.3 per cent lower Wednesday after gaining in the previous two days. The onshore yuan strengthened 0.2 per cent as at 3.11 pm to 6.983 per US dollar.

The Politburo on Wednesday signalled that more stimulus could be on the cards next year, saying fiscal policy will be kept active, with a focus on improving its efficiency, while monetary steps will be “targeted and forceful”. China will “push for overall improvement of the economy”, the official Xinhua News Agency said in a readout of the meeting.

Larry Hu, head of China economics at Macquarie Group, said the message from the Politburo meeting was “loud and clear: zero-Covid is behind us, and growth would be the top priority for next year”. The signals suggest that policymakers want to bring next year’s growth rate back to its potential of above 5 per cent, he said.

The growth outlook for next year remains highly uncertain, given a likely surge in Coronavirus infections and further disruption expected to the economy. The global economy is also at risk of falling into recession, and a recovery in China’s property market remains elusive.

A target of around 5 per cent would be in line with the 4.9 per cent median forecast for GDP growth for next year in Bloomberg’s survey of economists. Some banks like Barclays and Nomura Holdings are more bearish though, expecting growth to come in at four per cent or below.

Government-linked economists have also differed in their views. Wang Yiming, an adviser to the People’s Bank of China, called on the government to set a growth target above 5 per cent for next year, to send a strong signal that supporting the economy is a priority.

Liu Yuanchun, president of the Shanghai University of Finance and Economics, favoured a “more prudent” growth goal of 4.5 per cent to 5 per cent to preserve policy room for handling possible future global risks.

China’s economy needs to expand around 4.7 per cent annually on average in the 15 years till 2035, to achieve a goal set by President Xi Jinping in 2020 of doubling GDP over the period.

This year will mark the first time Beijing misses its GDP growth target – set at around 5.5 per cent for 2022 – by a significant margin. Economists surveyed by Bloomberg estimated that GDP growth will come in at just 3.2 per cent this year, which would be the weakest pace since the 1970s, barring the pandemic slump in 2020.

“A target of about 5 per cent is not greatly out of line with what China can grow at the moment without running into economical or financial problems, especially after a very weak 2022,” said Louis Kuijs, Asia-Pacific chief economist at S&P Global Ratings. He estimated China’s pace of potential growth right now at between 4.5 per cent and 5 per cent. BLOOMBERG