Focus shifts from growth to structure

Government report conveys confidence in the economic transition and an emphasis on deeper, more difficult reforms

Much was decided about the direction of China's economy at this year's Central Economic Work Conference, which ran from Dec 14 to 16 in Beijing. Each December, Chinese leaders use the conference to map out their priorities for the year ahead, and to issue a communique summarizing the policies and targets they have chosen.

Readers of the communique of the just-closed talks can tell that, other than the tasks to continue from 2016, there will probably be more, rather than less, reform measures undertaken next year.

However, the communique did not mention a single word about growth. This is quite contrary to the nearly four-decade-long practice of a government that built its legitimacy on delivering the world's top GDP growth rate.

In the days following the conference, a research report by the Chinese Academy of Social Sciences recommended that 2017's GDP growth should be set at 6.5 percent, in line with the forecasts of many international investors.

There has been little debate this year whether chasing so much growth is realistic, or whether it's actually a good thing.

What was not articulated is symbolic of change. It represents a shift of focus.

From the initial few years of its economic transformation, China has gained experience and confidence in maintaining a level of growth to, by and large, generate the jobs it needs without relying on exports and bailout money for state-owned enterprises.

Compared with the first-generation problems in the transition, namely whether the country can survive shrinking export orders and the relocation of manufacturers to cheaper cities overseas, China can now focus on the more difficult problems, most importantly to accumulate experience in managing and protecting its financial system.

This is exactly the focus of the Central Economic Work Conference - and its central task for 2017.

China's emphasis on speedy growth has historical roots dating to the beginning of the reform era. Deng Xiaoping, the leader of the reform, once said: "Only development" provides a solid basis for the future. Most Chinese interpret development in this case as meaning the growth rate.

Through the 1990s and 2000s, China was the fastest-growing economy in the world.

The speed of growth remained an issue of debate after the government-led transition began in 2013. International observers asked time and again whether a certain growth target is within China's reach, considering the difficulties it faces at home and in the rest of the world.

Last year, the government worked hard to achieve a year-on-year growth rate of 6.9 percent. The rate was 10.3 percent in 2010.

The question remains whether it still makes sense to keep a growth target, be it a fixed figure or a certain range. The official target in Premier Li Keqiang's government work report to the National People's Congress is set as above 6.5 percent through the 13th Five-Year Plan (2016-20), and 6.5 to 7 percent for 2016.

Some suggest that China should abandon its growth target once and for all. This is in order to avoid making big efforts to sustain growth when there are so many limitations, and for the government to save face if it fails to deliver the set rate.

Since China managed to maintain a 6.7 percent growth rate in the first three quarters of 2016, little doubt exists about the achievement of its full-year target - even as its export orders continue to dwindle and world commodity prices continue to edge up.

In fact, in the last couple of years, exports have stopped playing as important a role in China's overall growth. And the fact that the nation is no longer set on being the world's factory may well be seen as a timely precaution against the looming protectionism in today's world.

While the Central Economic Work Conference said nothing about growth, it did not mention foreign trade either.

This suggests even more that China's shift of focus is serious. So people may expect more attempts in 2017 to improve the country's financial health, and especially to control the risk of the dangerous debt burden on its enterprises and local governments.

The author is an editor-at-large at China Daily. Contact the writer at edzhang@chinadaily.com.cn

(China Daily European Weekly 01/06/2017 page13)