Experts say lower GDP no problem for China

Policymakers expected to be flexible in their drive for high-quality growth

BEIJING: Chinese policymakers will likely be more flexible when setting next year’s growth target, showing greater tolerance for slower growth in exchange for policy leeway to carry out longer-term reform objectives that are crucial to the country’s high-quality development, analysts said.

Top leaders in Beijing will gather at the annual Central Economic Work Conference, scheduled for later this month, to discuss economic and reform plans in detail. The meeting will set China’s economic agenda and the overall policy tone for the coming year.

Most economists expect the policy tone to emphasise quality growth over speed, with more flexible and targeted efforts that focus on ensuring an orderly economic deceleration and strike the right balance between maintaining stable growth and containing economic risks.

That policy stance was reflected on Friday in a statement by the Political Bureau of the Communist Party of China Central Committee. It said the basic trend of steady long-term growth for China’s economy remains unchanged, and it emphasised the need to keep macroeconomic policies stable and microeconomic measures flexible.

A pledge emerged from the meeting to make policies more pre-emptive, targeted and effective, including better use of countercyclical tools to ease downside risks.

While stabilising growth is an important task for the central government, economists have been debating whether China’s policy priority next year should be preventing GDP growth from falling below 6%.

Some believe that a growth target above 6% will involve a large-scale stimulus, which would mean substantial policy easing, further build-up of debt and higher financial risks. Such measures could give the economy an immediate boost but could also produce serious side effects and delay the reforms necessary for China to achieve high-quality development.

Qu Tianshi, China economist at Bloomberg Economics, said that a GDP growth rate below 6% is not something to worry about, as China is still capable of achieving the goal of doubling its 2010 GDP and per capita income for urban and rural residents by 2020 even with slightly slower growth.

“We believe the overall policy tone is likely to be a continuation of the recent tone,” said Yu Song, chief economist at Beijing GaoHua Securities, a subsidiary of US bank Goldman Sachs in China.

Reform measures, including greater opening of the agriculture and services sectors and more protection of intellectual property rights, will likely get priority, Song said in a research note.

This article originally appeared on the China Economic Net 

Published in The Express Tribune, December 10^th, 2019.

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