China's leaders 'to endorse lower growth goal'

Meeting on economic, social blueprint in October will come as tensions with US rise

BEIJING • China's leaders are poised to endorse a lower economic growth target for the country's next five-year plan compared with 2016-2020, as the authorities navigate growing challenges fuelled by a deepening rift with the United States, policy sources said.

President Xi Jinping and other leaders are expected to discuss and approve China's economic and social development blueprint for 2021-2025 at a key Communist Party conclave next month, the sources told Reuters.

State news agency Xinhua said yesterday that the meeting will be held from Oct 26-29.

Policymakers believe that setting a five-year growth target is vital for steering the world's second-largest economy past the "middle-income trap", the sources said, after internal debate over whether it should abandon such targets to enable more flexibility.

The target also keeps local governments focused on development goals at a time of a deepening rift between China and the US over a broad range of issues, they said.

"There will be an economic target. Where is the direction of development if there is no such anchor?" said one source who is involved in the debate.

Government think-tanks and economists have made recommendations for average annual gross domestic product (GDP) growth targets including "around 5 per cent", 5-5.5 per cent to 5-6 per cent, the sources said.

China is targeting average annual growth of over 6.5 per cent for the 13th five-year plan that ends this year.

China's State Council Information Office did not immediately respond to a request for comment.

Some government advisers have argued that China should do away with official growth targets - a legacy of decades of central economic planning - to reduce reliance on debt-fuelled stimulus and encourage more productive investment.

Reform advocates hope President Xi's proposed "dual circulation" strategy, expected to be the centrepiece at the conclave, will be an opportunity to quicken reforms to spur domestic demand and unleash fresh growth engines.

In May, China abandoned its annual GDP growth target, for 2020, for the first time in 18 years due to a heavy blow from the coronavirus crisis, although some economists suspected the government has maintained an implicit goal of around 3 per cent.

The five-year plan is expected to be unveiled at the annual Parliament meeting early next year. A growth target for 2021 itself, also to be unveiled at the Parliament session, is likely to be set by top leaders at an annual economic conference in December.

"We expect the government to either not set an explicit growth target or set a lower and more flexible (for example, around 5 per cent) growth target" for 2021-2025, analysts at UBS said in a note to clients.

China faces growing headwinds to maintain its ascent as the US ratchets up pressure on trade, technology and other fronts, threatening a decoupling of the world's two largest economies.

Annual growth of about 5 per cent would be enough for China to bypass the "middle-income trap" that has befallen countries such as Argentina, Brazil and South Africa, which have struggled to boost productivity and shift towards higher value-added industries.

The World Bank defines high-income countries as those with per capita gross national income of above US$12,535 (S$17,218). China's per capita income reached US$10,410 in 2019, according to the World Bank.

The State Council's Development Research Centre, the Cabinet's think-tank, said in a recent report that it expects China to become a high-income nation by 2024 and overtake the US as the world's largest economy by 2032.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 29, 2020, with the headline 'China's leaders 'to endorse lower growth goal''. Print Edition | Subscribe