Still plenty of questions about China’s economic trajectory after weak April data
Wind appears to be blowing in direction of structural reform but growth targets remain in place
Beijing’s commitment to painful structural reform of the mainland economy remains in question after a credit-fuelled rebound fizzled away in April and another verbal warning from President Xi Jinping.
While the authorities are voicing disdain for leveraged growth and beating the drum for supply-side reform with Chinese characteristics, they remain committed to an annual economic growth target of at least 6.5 per cent for the coming five years, and the trade-off between long-term sustainability and the need for immediate action to keep growth on track will continue to trouble policymakers.
“China will keep walking on a tight rope” between growth and reform, said Chen Xingdong, the chief China economist with BNP Paribas in Beijing. “For reform, China is seeing the urgency to act, but motivation for implementation is not strong.”
Xi, the Communist Party chief, urged his comrades to be bold and brave in rolling out structural changes, even though doing so might hurt, according to state media reports of remarks he made on Monday at a meeting of the party’s central leading group on economic affairs – the ultimate decision-making body on economic policies.
China will still guard the bottom line of growth – the target of a minimum 6.5 per cent growth is still very important
His latest instructions follow the publication last week of a long speech Xi made in January on “supply-side structural reform” and an interview with an unidentified “authoritative person” who criticised the government’s Keynesian policy of propelling growth by injecting an unprecedented amount of credit in the first quarter. Both articles appeared in People’s Daily, the Communist Party’s mouthpiece newspaper.