The giant consequences of China’s 6.5%-7.0% growth target
- By John Ross
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E-mail China.org.cn, March 8, 2016
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Chinese President Xi Jinping joins a group deliberation of deputies from Heilongjiang Province to the annual session of the National People's Congress in Beijing, capital of China, March 7, 2016. [Xinhua/Lan Hongguang] |
The economy tops the agenda at this year's National People's Congress (NPC) with a focus on both prospects for 2016 and the 13th Five Year Plan for 2016-2020. Discussion on both was framed by two major events. On March 4, Chinese President Xi Jinping made key statements on China's long term economic strategy while attending a panel discussion at the annual meeting of the Chinese People's Political Consultative Conference (CPPCC). On March 5, Premier Li Keqiang delivered the government's work report to the NPC focusing on medium to short term targets. The relation between the two was clear.
At the CPPCC, Xi Jinping reiterated that China's fundamental economic structure would continue to be based on "diverse" forms of ownership which would develop side by side with a state sector that would play the "dominant" role - a firm restatement of China's fundamental economic strategy since reform was launched in 1978. This economic structure generated in 1978-2015 an average annual GDP growth of 9.6 percent - the fastest sustained expansion by a major economy in history.
Xi Jinping's emphasis may be placed in the context of two statements he made in November. At a politburo study session China's president emphasized that a Marxist political economy would continue to guide China's economic policy. Following a meeting of the Communist Party of China's Central Committee, the president stated that economic growth during the 13th Five Year Plan period must average "at least 6.5 percent."
Premier Li Keqiang's work report to the NPC outlined medium to short term projections within these fundamental parameters. As the international media focused attention on 2016's growth target of 6.5-7.0 percent, and the Five Year Plan's minimum annual 6.5 percent, these will be analyzed first.
Qualitatively, China's target is to achieve a "moderately prosperous" society by 2020. This translates into the Five Year Plan's arithmetic.
To achieve "moderate prosperity," the previous 12th Five Year Plan set the goal of doubling GDP for 2010-2020 - requiring a 7.2 percent annual average growth over the decade. However, in 2010-15 growth was faster than the targeted rate - averaging 7.8 percent. To complete the goal by 2020 now requires 6.5 percent growth. This constitutes the basis of the "at least 6.5 percent" target during the 13th Five Year Plan reiterated in Li Keqiang's government report. The 2016 growth target is to meet or exceed the annual rate required to achieve "moderate prosperity" by 2020.
Both the Five Year Plan and 2016 targets are aimed at achieving their goals without economic overheating. In 2016, inflation is forecasted at 3 percent, accompanied by a budget deficit of 3 percent of GDP - modest by current international standards. Environmental protection is emphasized with energy consumption per unit of GDP targeted to fall by 3.4 percent in 2016. The Five Year Plan, for the first time, incorporates a total cap on annual energy consumption - an equivalent of 5 billion metric tons of coal by 2020. To sustain technological innovation, R&D expenditure will rise from 2.0 percent of GDP in 2015 to 2.5 percent by 2020.
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