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Reform 'means slightly slower growth'

Updated: 2013-12-11 00:09
By Li Yang ( China Daily)

Analysts are issuing their forecasts for China's 2014 outlook. Many believe that GDP growth will be as strong as this year — or maybe a bit lower — as the nation carries out reforms.

This year, GDP growth is likely to be 7.6 percent, just a touch above the official target of 7.5 percent.

Global demand for Chinese products is likely to improve in 2014, so the government doesn't need to make any deliberate attempt to push the growth rate back above 8 percent, analysts said.

Some key think tanks have already suggested that the growth target should be lower next year.

Zhu Baoliang, a senior economist with the State Information Center, a government think tank, warned that China must avoid repeating its mistake of "blind pursuit of growth".

The center released a report on Dec 2 saying that China should lower its growth target to 7 percent to allow for structural changes.

The Institute of Economics at the Chinese Academy of Social Sciences has reportedly suggested that 7 percent GDP growth will be sufficient for China to complete its goals for the 12th Five-Year Plan (2011-15).

Zhou Xiaochuan, governor of the People's Bank of China, the central bank, told a forum in late November that "steadiness" will be the economy's keynote for 2014. Another PBOC official, Vice-Governor Yi Gang, said GDP growth will hover at about 7 percent for the foreseeable future.

Several think tanks have called for a consumer price index target of 3.5 percent for next year and growth in M2 money supply of 13 percent.

They said that China will maintain a proactive fiscal policy (emphasizing many government-led investment projects) and a prudent monetary policy (cautious about credit creation).

The actual targets will come out of the Central Economic Work Conference, which opened on Tuesday in Beijing. Even those numbers won't be final until they're approved by the top legislature —the National People's Congress — in March as part of the premier's Government Work Report to the lawmakers.

Nonetheless, the suggested numbers being proposed by researchers close to the government are useful, because they define the "comfort zone" of the economy, the range with which the government feels most confident.

The comfort zone, according to Zhang Shuguang, an economist with the Beijing-based Unirule Institute of Economics, is for GDP growth to stay between 7 and 7.5 percent. He gave that range in comments to the Securities Market Weekly.

Some analysts also believe that with a stronger global economy and robust domestic urban investment, China will easily achieve GDP growth somewhat higher than 7 percent in 2014.

One reason China doesn't need the double-digit growth rates of the past is it must change the economic growth model, researchers said.

Starting in 2014, policies must be more specific, whether they relate to monetary policy, the financial markets or urban development.

Just improving the fiscal system, a crucial aspect of reform, requires a daunting series of efforts, as suggested by the State Information Center.

The efforts include expanding the size of the fiscal deficit and government debt, allowing local governments to increase their tax revenues (especially from taxes on consumption and property), strengthening budgetary controls and building a standardized and open market for local government debt.

Few forecasts have touched on the subject of unemployment. For example, how will as many as 7 million college graduates find jobs? These issues are yet to be seriously discussed.

But they are top concerns for the leaders. As Premier Li Keqiang said many times, the urban job market is most sensitive to GDP growth. If growth is sluggish, it can be socially destructive. He said ideally, China should try to maintain GDP growth of at least 7 percent from now to 2020.

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