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With the US-China trade war likely to drag on, are Beijing’s economic growth targets still valid? Maybe not
- Markets believe certain growth levels need to be maintained in China’s quest to become a ‘moderately prosperous society’ and, ultimately, a superpower
- However, with the trade war and changing external circumstances, missing growth targets might become the new norm
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When China’s economic output slowed to the critical level of 6 per cent in the third quarter of the year, policymakers – puzzlingly – seemed to attach less weight to the figure than markets expected.
Also, as the Post reported recently, more than one-third of China’s provinces have so far fallen short of this year’s growth targets. Historically poorer regions took the hardest hit, official data showed.
For example, the three northeastern provinces – Liaoning, Heilongjiang and Jilin – posted growth rates of 5.7 per cent, 4.3 per cent and 1.8 per cent in the first three quarters, lower than the respective targets of 6 to 6.5 per cent, 5 per cent and 5 to 6 per cent.
Certainly, one can argue that the 6 per cent growth rate is no surprise, given the consensus on an economic slowdown in China. Chinese policymakers have also acknowledged on several occasions that the economy is under pressure.
However, if we extrapolate the data, we are likely to witness a sub-6 per cent growth rate soon, which is seen by many as Chinese policymakers’ lower limit.
Why is 6 per cent a critical point? In 2012, China set itself an ambitious goal of doubling gross domestic product by 2020, from 2010 levels, as part of a commitment to building a “moderately prosperous society”. This was also seen as a signal of China’s quest to emerge as a superpower. However, a simple calculation suggests that if growth dips below 6 per cent in 2020, there is a risk of China falling short of this target.
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