Bloomberg News

China May Set Lowest Growth Target Since 2004, Researcher Says

February 17, 2012

Feb. 16 (Bloomberg) -- China may set its lowest annual growth target in eight years as authorities place less emphasis on the pace of expansion and the global economy remains weak, Fan Jianping, chief economist at the government-run State Information Center, said.

Premier Wen Jiabao may announce a 7 percent or 7.5 percent target for economic growth this year at the annual National People’s Congress meetings that convene in March, Fan said in an interview today. The last time China set a growth target below 8 percent was in 2004, when the goal was 7 percent.

“A lower target will act as a guidance for local authorities to not focus on chasing speed,” said Fan, who is head of the Economic Forecasting Department at the center which is controlled by China’s top economic planning agency. “Growth will slow because the world outlook remains weak while a lot of things also need to be done domestically in terms of economic rebalancing,” he said.

Average annual growth of 10 percent in the past three decades that transformed China into the world’s second-largest economy also made it the world’s biggest polluter and spurred a widening income gap. Premier Wen last year unveiled a five-year plan for the period through 2015 that targeted annual expansion of 7 percent and said the government’s emphasis would be on ensuring the “quality and benefits” of growth.

Global Economy

The uncertain outlook for the global economy will also lead China’s central bank to keep policies flexible, Fan said. The People’s Bank of China hasn’t set a target for money supply growth this year because it is difficult to forecast what the flow of foreign capital may be like, he said.

Fan also said he doesn’t expect the central bank to lower the reserve requirement ratio for commercial lenders in the first quarter. The monetary authority will more likely rely on open market operations to adjust liquidity, Fan said, referring to central bank purchases and sales of bills to increase or decrease the amount of money in the banking system.

A cut in interest rates is “not very likely” this year because real deposit rates continue to be negative, he said. China’s benchmark one-year deposit rate has lagged behind inflation for two years.

--Victoria Ruan. Editors: John Liu, Nerys Avery

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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