China will give more priority to economic upgrading and restructuring in 2015, according to a statement issued on Nov 11 following a key economic policy meeting.
The country will tap the huge potential of the economy to hedge against great downward pressure next year, the statement said.
The Central Economic Work Conference, which opened on Dec 9 and ended on Dec 11, set the tone for next year’s policy agenda.
While repeating previously used language such as “keeping growth within a reasonable range”, the statement spoke of fostering new growth points and making the economy more consumption- and service-driven.
“Mass, featureless consumption has basically come to an end and customized consumption is becoming the mainstream,” the statement said.
“Infrastructure interconnection, new technology, new products and new business models have enabled massive investment opportunities,” the statement said in describing the “new norm”.
“New norm” is a phrase used by President Xi Jinping several times recently, reflecting the leadership’s drive to wean the economy from dependence on infrastructure investment and exports.
The central bank cut interest rates in November as the nation headed toward its slowest annual growth expansion since 1990.
The statement said China has resilience, huge potential and plenty of room to maneuver on policy. It must make the best use of these advantages.
“China has plenty of room to upgrade its consumption structure. Large disparity exists among regions and urban and rural areas,” said Xu Hongcai, a senior researcher at the China Center for International Economic Exchanges.
The statement stressed that China should actively adjust itself to “the new norm” and pursue the quality and efficiency of the economy.
The statement said China will continue to adopt a “prudent” monetary policy and “proactive” fiscal policy. But monetary policy should be neither too tight nor too loose, and fiscal policy should be more “forceful”.
Wendy Liu, managing director and head of China equity research at Nomura Securities, said this means that fiscal and monetary policy will be more flexible,” quickly adjusting itself to the actual situation”. Given that inflation has eased, monetary policy will be looser than it has been this year, Liu said.
Xu said fiscal policy could be a little more expansive while the tax burden is reduced through structural means. The government spending structure will also change, with more investment being made through the public-private partnership model.
The meeting did not specify the economic growth target for next year, but analysts said the emphasis on the “new norm” suggests the leadership has come to terms with the economic reality and will accept a target lower than 7.5 percent.
Liu said, “The economic down-turn may continue, and it is hard to see it bottoming in the short term. However, the slippage is still under control.
“I agree with a lower GDP target.... A lower growth rate will attract more foreign investors as the risk of high debt and excessive capacity may fall.”
Goldman Sachs wrote in a research note on Dec 11, “As the government tries to strike a balance between supporting growth and pushing forward reforms, we see a fair likelihood of 2014’s stop-and-go pattern for economic momentum in the new year.”
Goldman predicts that economic growth will fall to 7 percent in 2015 from 7.3 percent this year.
AT A GLANCE
Major tasks for 2015
1. Maintain stable economic growth by adopting a proactive fiscal policy and a prudent monetary stance
2. Discover and foster new sources of economic growth
3. Transform agricultural development
4. Better coordinate regional economic growth
5. Improve people’s livelihoods
Chen Jia contributed to this story.