China’s economic growth: Slower is better, say analysts
Communist Party delegates will gather on Monday to make sweeping changes to China's constitution, handing President Xi Jinping more power AFP/NICOLAS ASFOURI
SINGAPORE: China’s annual parliamentary session is set to convene with Premier Li Keqiang delivering his annual work report on Monday (Mar 5). All eyes will be on the economic targets as China’s focus turns from high speed, to high quality growth. However, there will be challenges standing in the way of this goal, said analysts.China's economy had a good year in 2017, with the country’s gross domestic product going up by 6.9 per cent – the first time in seven years that the pace of growth has picked up.This also beat Beijing’s annual target of around 6.5 per cent.But policymakers in the Chinese capital may still set a slower growth target for 2018 and analysts said slower is actually better.“The consensus so far is China’s economy will grow between 6.5 to 6.7 per cent, which is slightly lower than last year but not bad,” said Associate Professor Henry Gao from the School of Law at Singapore Management University.
“The government is trying to tackle environment protection, high housing prices, medical reform but also educational reform. If the government can tackle these issues, that means more people would be able to enjoy the fruit of economic development.”It’s a new growth model for the world’s second-largest economy championed by Chinese President Xi Jinping, one that is focused more on sustainability and quality rather than breakneck growth above all else. Decelerating growth is needed to facilitate long-delayed reform and that is also seen as the answer to China’s many problems, said observers.“In the last 20 or 30 years, Chinese officials have been told to boost high economic growth for their future promotions,” said Dr Chen Gang, Assistant Director of Policy Research at the National University of Singapore’s East Asian Institute.“If we look at today’s China’s economy, like some of the problems they are facing - like the ghost city problem, the local debt problem and also the inefficiency of state-owned enterprises - all these issues are related to this pro-growth mindset of the bureaucrats. So if China wants to cope with these problems, we have to change this GDP-first mindset first.” That could be a big shift that will take a herculean effort, on top of having legacy issues to overcome.China has a goal to double its 2010 gross domestic product and per capita income by 2020 – a goal set by Mr Xi’s predecessor Hu Jintao.“It looks like they are not willing to take the risk of public relations negativity, from not reaching that goal. So it looks like growth this year at 6.4 per cent and next year and the year after has to average 6.3 per cent to get to that doubling by 2020. So, that sets the agenda,” said Dr Simon Baptist, Chief Economist at The Economist Intelligence Unit. “In some ways this is a short-term positive for the Chinese economy of course, but it is also a medium-term negative perhaps because a consequence of keeping growth so high is that the government is going to have to de-prioritise the agenda of reforming the financial sector and dealing with some of the debt issues.”The International Monetary Fund has urged Beijing to lower or even do away with official growth targets altogether, so that officials will have less incentive to prop up growth through debt-fueled stimulus. This year marks 40 years since China began its reform and opening up policy, President Xi recently noted that the country has taken a great leap from catching up, to now leading the times.But his country is also at a crossroads, and the policies to be announced in the coming days will be among steps that will determine how the future turns out for China.
Source : http://www.channelnewsasia.com/news/asiapacific/china-s-economic-growth-slower-is-better-say-analysts-10006990