China likely not to set numerical GDP growth target: GT poll

One of the most closely watched aspects of China’s two sessions each year is the release of the official target for GDP growth, a reliable indicator of where the world’s second-largest economy is headed. 

However, this might change this year, as the country continues to grapple with rising risks for the economy amid the global COVID-19 pandemic and seeks to balance in a slew of policy priorities, according to a Global Times survey on Tuesday.

More former officials as well as top economists believe that senior Chinese officials will not release a specific numerical growth target for this year during the upcoming two sessions, although some still believe that one might still be released to better coordinate policies, the GT survey showed.

Scrapping a specific target growth range would be a direct response to the extreme circumstances created by the COVID-19 pandemic and demonstrate a significant economic and political shift in the country’s focus from the relentless pursuit of rapid growth, proving to be effective but also could result in excessive production and wastage, toward a more balanced and sustainable focus on both speed and quality, economists noted.

Such a move could also be of great significance this year in particular, as dropping a specific target would free up more room for top policymakers and local officials to divert more resources to address rising challenges posed by COVID-19 such as unemployment and people’s livelihoods rather than pumping up GDP figures, they added.

End of an era 

In a survey of 20 former officials, incumbent statisticians and top economists, 11 said they believe that there will be no specific growth target released or even if there is a target this year, it would not be the same numerical target that we have seen previously but more similar to a description.

Still, seven respondents said that a numerical target for GDP growth is still likely to be released.

China usually issues the annual GDP growth target, along with a series of other targets, including consumer pricing and deficit-to-GDP ratio, in the Government Work Report submitted to the National People’s Congress (NPC), the top legislature, which is set to open its annual session on Friday.

Last year, China set a target range of between 6 per cent and 6.5 per cent in GDP growth, only the second time the country released a target range instead of a specific target since 1995. At 6.1 per cent, GDP growth in 2019 fell in line within that range.

But as the country was on track to meet a long-term goal of doubling the 2020 GDP based on 2010 levels with a growth rate of at least 5.6 per cent, the outbreak of the novel coronavirus hit the country, which plunged much of the world’s second-largest economy into a near standstill for weeks and resulted in the worst GDP contraction in decades at 6.8 per cent in the first quarter.

Although China has brought the domestic epidemic under control and embarked on a steady recovery journey, the lingering pandemic overseas still poses tremendous uncertainty and risks for the Chinese economy, creating serious a predicament for policymakers to set a feasible target, economists said.

“This year, the Chinese economy faces such huge uncertainty that setting a growth target is simply too difficult,” said Tang Jianwei, chief macro analyst at the Financial Research Center of the Bank of Communications. He argued that setting a high target might turn out to be unfeasible given overseas risks, while setting a low target offers no meaningful guidance.”Not setting a GDP growth target is the refection of realistic and down-to-earth policy.”

However, some argue that a growth target, even if it’s a range, could help improve policy coordination to revive the economy this year.

“It’s better to have a target than none at all, although it’s hard to set an accurate one,” said Liu Yuanchun, vice president of the Renmin University of China and a distinguished expert of the State Council, China’s cabinet.

Liu said that a target range between 3 per cent and 5 per cent is more likely, which is largely in line with other analysts polled by the Global Times. In the survey, economists forecast a GDP growth of between zero and 5 per cent, while most say a growth rate of around 3 per cent is more likely. Chinese officials have not made any announcement regarding the GDP growth target this year, but recent meetings of top officials have clearly paid more attention to issues such as unemployment rather than pure growth speed.

A meeting of the top leadership chaired by President Xi Jinping on Friday stressed that “the employment priority policy” should be further strengthened, calling for more proactive fiscal policy and “more flexible and appropriate” monetary policy, Xinhua reported.

Several meetings of the State Council have also paid attention to unemployment and people’s livelihoods. Top officials have also indicated that as long as the job market remains steady, a slower GDP growth is acceptable.

Unemployment has become the most pressing issue since the COVID-19 epidemic began, as unemployment is skyrocketing In April, surveyed urban unemployment rose to 6 per cent from 5.9 per cent in March, while more than 8 million new college graduates are expected to enter the job market in the fall.

A man browses through wanted ads at an employment market in Qingdao, East China’s Shandong Province on April 8. Photo: IC

Room to maneuver
That has further sparked speculation among many economists that a numerical growth target might be skipped entirely or given less focus, to make more room for policy maneuvers in other areas such as unemployment and a series reforms for high-quality and sustainable growth, economists said.

“Not setting a GDP target does not mean policy inaction. I suggest we should use employment to replace GDP growth as the main economic development goal for the year,” Tang said, noting that job-centric policy guidance could prevent “senseless” flood-like stimulus and is better in line with the pursuit of high-quality growth.

Apart from unemployment, other top priorities for Chinese policymakers to ensure sustainable growth include a deleveraging process to squeeze rising debt levels, supply-side reforms to upgrade its industrial capabilities and boost domestic consumption, also requiring Chinese officials to refrain from opening the floodgates of stimulus in pursuit of GDP growth that could reverse those efforts, analysts said.

Wan Zhe, a former chief economist at the International Cooperation Center of the National Development and Reform Commission, the country’s top economic policy planning agency, also said that a “more comprehensive indicator” includes unemployment rates, consumer pricing and others rather than just a GDP growth target.

Moreover, paying more attention to unemployment and other issues does not mean China would face a lack of policy tools to stabilize growth, economists argued.

“There is ample room for the government to use more expansionary fiscal policy” and “still large” enough space for interest rate cuts, Yu Yongding, a former member of the monetary policy committee of the People’s Bank of China, wrote in a recent article, pointing to a relatively low government debt-to-GDP ratio, the relative strong demand for government bonds and low inflationary risks.

Yu told the Global Times that while he would not predicate whether a specific target will be set, he estimates the Chinese economy could reach 3.2 per cent growth this year.

“With a strong stimulus package, as long as the virus is contained, China’s growth prospects for 2020 should be OK,” Yu wrote.