China’s government may cut the country’s annual growth target to 7 percent next year, although the actual pace of expansion will be higher, according to Fan Jianping, chief economist at a state research institute.
The drop would be in line with the goal set in the country’s 2011-2015 five-year plan for annual average expansion of 7 percent, Fan, who works at the State Information Center under the National Development and Reform Commission, said in an interview in Shanghai on Sept. 7.
China’s economy is set to expand 7.5 percent this year, matching the government’s target set in March and the weakest pace in 23 years, amid curbs on credit expansion, property development and overcapacity. President Xi Jinping said last week the government chose to bring down the growth rate to solve “fundamental problems” hindering long-run development.
China should stick to the annual goal set in the five-year plan, Fan said. “Why should the target be changed every year. It shouldn’t happen.”
Fan said his forecast for a cut in the growth target was based on his own research.
The country’s annual growth rate will stay in a range of 7 percent to 8 percent over the next few years and the government should use this window to speed up economic restructuring, Fan said at a conference in Shanghai.
China sets an annual average growth target for the economy in its five-year plans and the premier announces a goal for the year at the annual session of the National People’s Congress every March which may differ.
While the goal set in the current five-year plan through 2015 is an annual average 7 percent, the government announced a 2011 target of 8 percent in March that year and 7.5 percent goals in March 2012 and 2013.
The 2006-2010 plan set an annual average target of 7.5 percent and the goal announced to the NPC every March of that period was 8 percent. The targets were routinely exceeded, with gross domestic product rising an average 11.2 percent a year from 2006 through 2010.
Barclays Plc’s Hong Kong-based China economist Chang Jian said in July she expects Premier Li Keqiang will lower the 2014 expansion target to 7 percent when parliament meets in March.
China’s economic growth slowed to 7.7 percent in 2012 and may ease further to 7.5 percent this year, according to the median estimate of 52 analysts in a Bloomberg News survey last month.
“It’s hard to find good reasons to be optimistic” about a recovery in China’s growth, Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in a Sept. 6 interview. “The economy has been pretty much supported by investment, especially property and infrastructure, but it’s hard to see how the momentum can continue.”
Zhang, who sees “moderate upside risks” to his third-quarter growth estimate of 7.4 percent after better-than-expected economic data, said he’s maintaining his 2014 forecast of 6.9 percent as the current recovery is unsustainable.
GDP (CNGDPYOY) rose 7.5 percent in the April-June period from a year earlier, the second straight quarterly slowdown. Monthly purchasing managers’ indexes, industrial output and export data have strengthened since July, bolstering confidence that Premier Li’s policies have stabilized the economy.
Exports increased more than estimated in August, customs administration data showed yesterday, adding to signs of a recovery. Shipments climbed 7.2 percent from a year earlier, beating the 5.5 percent median estimate in a Bloomberg News survey and up from a 5.1 percent advance in July.
At the same time, gains in imports slowed to 7 percent, down from 10.9 percent the previous month and trailing the median analyst forecast of 11.3 percent. The moderation mainly reflected weaker imports of goods for processing, while inbound shipments related to domestic demand “held their strength,” Wang Tao, chief China economist at UBS AG in Hong Kong, said yesterday.
Goldman Sachs Group Inc. last week joined JPMorgan Chase & Co. and Deutsche Bank AG in raising its third-quarter growth estimate. The bank now forecasts expansion of 7.7 percent, up from a previous 7.3 percent, and sees fourth-quarter growth of 7.4 percent, up from 7 percent.
China’s economy has stabilized “but rising industrial output and a falling producer prices index shows the recovery lacks momentum,” Fan said at the conference. The country’s capacity utilization rate is now running at about 72 percent, he said.
--Alfred Cang, Nerys Avery. With assistance from Daryl Loo in Beijing. Editors: Nerys Avery, Garry Smith
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