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Growth target ‘can be met’ despite lower projections

Lan Lan and Chen Jia
Updated: Sep 23,2015 9:26 AM     China Daily

China’s top economic planner said on Sept 22 that the government is confident of reaching its annual growth target of about 7 percent.

The comment came as two institutions lowered forecasts for China’s growth. On Sept 22, the Asian Development Bank lowered this year’s growth projections for the country, saying that growth in the first eight months had slowed more than expected.

The bank trimmed its GDP growth forecast to 6.8 percent for this year and to 6.7 percent for 2016, compared with March estimates of 7.2 and 7 percent respectively.

Jurgen Conrad, head of the economics unit at the ADB’s China office, said a key factor behind the change was the delayed recovery in major industrial economies.

The fatal blasts in Tianjin last month and tropical storms had also held back activities in some key manufacturing centers in the third quarter.

On Sept 21, the Chinese Academy of Social Sciences, a top academic research organization, cut China’s growth forecast for this year from 7 percent to 6.9 percent.

But Li Pumin, secretary-general of the National Development and Reform Commission, China’s top economic planner, told journalists on Sept 22 that China can maintain a reasonable economic growth rate this year.

“We are confident of achieving the annual target of around 7 percent,” Li said, adding that inflation is likely to see a moderate rise in coming months, while the labor market will see stable expansion.

In the first eight months, new job opportunities increased by 9.52 million in urban areas, comprising 95 percent of the year’s target, according to the commission.

Experts said this is one of the reasons that the government can tolerate slower GDP growth without aggressive stimulus measures.

Li said consumption and the service sector are expected to show faster growth, while the industrial sector, which is affected by overcapacity, may maintain weak growth of about 6 percent.

The commission will strengthen policy support for investment, including stepping up special bond issuance and expanding the debt-to-bond swap program, especially to boost infrastructure construction investment, he said.

The ADB report said that investment growth will continue to moderate, and the fastest-growing investment sector will continue to be infrastructure.

However, the already-rapid growth of infrastructure investment is unlikely to pick up, as viable projects are hard to find after years of strong investment growth, the bank said.

In the first half of the year, consumption contributed 4.2 percentage points to China’s 7 percent growth, investment 2.5 percentage points and net exports 0.3 percentage point.

Conrad said structural reforms have “gained traction” in financial and fiscal reforms, deregulation, State-owned enterprise reforms, environmental protection, rural land reforms and urbanization.

Drivers of the Chinese economy include the potential for service growth, urbanization, income growth and private investment, he said.

Zhuang Jian, a senior economist at the ADB, said that in the long run, improving productivity is crucial for China as the country’s productivity is only about one-third of that in member countries of the Organization for Economic Cooperation and Development.

Niny Khor, an economist at the bank, said about two-thirds of workers in China’s labor market have not attended high school, so adding investment to the labor force would be important in improving productivity.