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Opinion
From education to taxes, how China can boost demand and drive growth
- Growth no longer depends on net exports or foreign investment but on aggregate demand from within China – and there are two promising sources
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Lawrence J. Lau is the Ralph and Claire Landau Professor of Economics at the Chinese University of Hong Kong, and the Kwoh-Ting Li Professor in Economic Development, emeritus, at Stanford University.
Earlier this year, before China announced its target economic growth of around 5 per cent for the year at the “two sessions” parliamentary meetings in March, I had forecast a range of between 5 per cent and 5.5 per cent – a range rather than a point forecast because of the uncertainties China and the world face.
My forecast was based in part on the target growth rates announced by the 31 provinces, municipalities and autonomous regions on the Chinese mainland. Based on the gross domestic products achieved by provinces last year, I calculate that the weighted average of the provincial target GDP growth rate this year is 5.41 per cent.
Thus, my range forecast is supported by the national and weighted average of individual provincial target growth rates.
For the first three months of this year, China’s economy grew by 5.3 per cent year on year. At the end of May, the International Monetary Fund raised its annual GDP forecast for China to 5 per cent from 4.6 per cent.
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