Business / Economy

Experts predict lower GDP growth target next year

By CHEN JIA/WU YIYAO (China Daily) Updated: 2014-12-10 11:06

Economists expect the three-day Central Economic Work Conference that opened in Beijing on Tuesday to focus on preventing downside risks and promising to accelerate the pace of various economic reforms in 2015.

The top leadership at the meeting might agree to a prudent monetary policy and proactive fiscal policy, which can support a lower GDP growth target with a decline of inflation expectation next year, they said.

A meeting of the Political Bureau of the Communist Party of China on Dec 5, which emphasized that the Chinese economy is entering a "new normal" stage, was seen as the guide of the 2015 economic work.

President Xi Jinping highlighted major tasks of 2015 based on a policy tone of "proactively adapting to the new norm" and "maintaining the economy in a reasonable range".

The leadership may have greater tolerance of slower growth as long as the job market remains healthy and the financial risks can be controlled, analysts said. Other goals like structural rebalancing and curbing pollution may be particularly important.

Economists and major financial institutions gave the same prediction that the government may lower its GDP target to 7 percent from 7.5 percent, and edge down the CPI target to 3 percent from 3.5 percent.

The broad money supply growth target may be 12 percent and the fiscal deficit share of GDP slightly higher than this year's budgeted 2.1 percent.

The detailed targets are unlikely to be confirmed and announced until the National People's Congress session in early March.

The world's second-largest economy is likely to miss its 7.5 percent GDP target this year-the first failure in 15 years-and the year's growth may hit the slowest rate since 1990.

The government last cut its annual growth target in 2012, to 7.5 percent from the 8 percent it had kept for eight years.

Fitch Ratings revised its 2014 GDP growth forecast on Tuesday, up to 7.3 percent from 7.2 percent, while maintaining its 2015 forecast an 6.8 percent and 2016 forecast at 6.5 percent.

Recent moves of policymakers that helped further liberalize China's financial system boosted financial institutions' sentiments to try innovative new reforms in the upcoming year, said Sun Lijian, vice-dean of the school of economics at Fudan University in Shanghai.

A major drive of economic development may remain investment-oriented, as consumption-oriented measures may not work effectively under current conditions, said Sun.

Recent macroeconomic data show that the upcoming year may present challenges for an economic recovery, and it takes profound reforms to upgrade industries from low value-added outputs to higher ones, he added.

Zhu Haibin, chief economist in China at JPMorgan Chase & Co, expects that 2015 economic growth will be characterized by weak investment, stable consumption and a large trade surplus.

"Next year's fiscal and monetary policies will be adjusted to ensure that GDP growth will not slide below 7 percent," he said. "In addition, the government will ensure that no systemic financial risks will materialize, by developing the capital market, tightening rules on local government debt and shadow banking, and policies to slow down adjustment in the real estate market."

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