BEIJING — Given looming downward pressure and ongoing economic restructuring, a lower average annual growth target of 6.5 percent will be acceptable and attainable for the world’s second largest economy in the next five years, according to analysts.
Chang Xiuze, a researcher with Tsinghua University and economist with a think tank under the National Development and Reform Commission, said the policymakers should set a bottom line of 6.5-percent annual growth for 2016 to 2020 based on the current economic circumstance.
“The economy will be confronted with even higher downward pressure, and the old economic goal set at 7 percent will be harder to deliver under a falling potential economic growth rate,” Chang said.
Tan Haojun, a prominent financial columnist, also advised economic planners to put the floor at 6.5 percent for economic growth.
Leaders of the Communist Party of China (CPC) are discussing an economic blueprint, namely the 13th Five-Year Plan, for the 2016-2020 period at the ongoing fifth plenary session of the 18th CPC Central Committee. A growth target to direct economic and social development in the period is expected to be unveiled.
The previous five-year plan (2011-15) set an average annual growth target of around 7 percent, which will no doubt to be fulfilled by the end of this year. Between 2011 and 2014, the economy expanded by an annual rate of 8 percent.
Economists believe Party leaders will lower the target amid the lingering economic slowdown and consider a less-than-7-percent growth rate acceptable to the economy.
Chang said China can still create enough jobs with 6.5-percent economic growth, and Tan believes the growth rate can ensure the country to fulfill its ambitious plan to double 2010 gross domestic product (GDP) and people’s income by 2020.
The Chinese economy expanded 6.9 percent year on year in the third quarter of 2015, the first time the quarterly growth rate has dropped below 7 percent since the second quarter of 2009, but still in the lead among major economies around the world.
Chang attributed the slower growth to a shift in economic engines, shrinking work force and pollution control.
“The ‘China Express’ is in a period when old engines are losing strength and new ones have yet to function in full swing,” he said.
China can no longer count on exports, investment and the property sector to drive its economy, he said. Slowing global recovery, intruding sovereign debts problems, weak external demand and rising trade protectionism will challenge export-oriented economies, while investment — the old economic therapy — is falling and becoming less effective for stimulating growth. The property sector, despite a warming, remains far from a complete recovery.
A falling working population, likely to see annual declines of 0.3 percent in the next five years, will mark the end of a demographic dividend and weigh on the slowing economy. China’s hard battle against environmental pollution will also affect economic expansion, Chang added.
While recognizing headwinds, Chang believes China is capable of attaining 6.5-percent annual growth in the next five years.
China’s speeding urbanization will foster domestic demand, Chang said. He expects urban residents will account for 60 percent of the total population by 2020, up from 54.77 percent last year. The opening up of the economy, including the Belt and Road initiative, Asian Infrastructure Investment Bank and free trade agreements, will provide fresh momentum for the economy.
China’s overall reform, with greater daring and resolution, will break vested interests and bring vitality to the economy, Chang said.
Tan agreed. He said reforms will be pivot to refuel the economy, as reforms in state-owned enterprises and financial sector will give a fresh push to the economy.
The expectations of lower growth target do not mean the economy will slip as pro-growth measures have started to take effect in multiple industries, Tan said.
Despite weaker traditional industries such as steel and cement production, technology-intensive industries and sectors related to consumption and environmental protection are stepping on the fast track. The high-tech sector grew 10.4 percent year on year in the first nine months, outpacing China’s general industrial output by 4.2 percentage points.
“Once emerging and high-tech sectors gather full strength, they will prop up the economy and help it maintain medium-to-high level growth,” Tan said.
China’s economic structure has also been improving with the rise of tertiary industry, which is more efficient, energy-saving and can provide more jobs. In the first three quarters, the value added of the service sector accounted for 51.4 percent of GDP, up 2.3 percentage points from the same period last year.
The government is promoting an economy led by the service sector, rather than traditional engines like manufacturing.
Chang said the government should continue to prioritize employment, prevent systemic risks in corporate and local government debts and hold the bottom line of 6.5-percent economic growth.
In 2015, the government rolled out a string of pro-growth measures to tackle economic slowdown, by promoting monetary easing, stepping up infrastructure construction and nurturing new growth points.
The People’s Bank of China, the central bank, cut the benchmark one-year lending and deposit rates and reserve requirement ratio (RRR) on Oct 23 to shore up the economy, marking the fifth RRR reduction and the sixth round of interest cuts since last year. The move will further reduce financing burdens on enterprises and serve as a boon for the real economy.