China’s economic growth rate should be between 5 and 6 per cent in the next few years, a number of studies published ahead of a key policy meeting have concluded.
Despite the disruption caused by the Covid-19 pandemic and deteriorating relations with the United States, the country’s economy still appears to be on course to grow this year after third quarter GDP rose by 4.9 per cent, making it the best-performing economy in the world.
This has helped to fuel optimism in Beijing that the country’s economy will continue to roar ahead in the coming years.
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This week the Communist Party’s Central Committee will meet in Beijing for the plenary session that will endorse the next five-year development plan and its economic road map through to 2035.
Targets for annual economic growth will remain a central part of the plans.
A growth rate between 5 and 6 is now widely regarded as the “potential growth rate” for the period, which means a higher figure would be regarded as “overheating” while anything below that would require further monetary and fiscal policy support
The Chinese Academy of Fiscal Sciences, which is affiliated to the Ministry of Finance, estimated in a recent report that China’s full-year growth in 2020 could reach 2.3 to 3 per cent before it returns to an average annual rate of between 5 and 6 per cent for 2021-2025.
Yi Gang, governor of the People’s Bank of China, said last week that the country’s “potential economic growth rate” will now become a key consideration in central banking, although he did not specify what the figure is.
Recent research from Peking University’s national school of development indicated that the potential growth will moderate from the current 6.5 per cent to 2.6 per cent by 2050, citing challenges such as foreign hostility, a rapidly ageing population and the shrinking labour force.
Meanwhile, a team led by Hu Angang, a Tsinghua University professor who claimed that China had already overtaken the United States as the most powerful country in the world in 2017, concluded in a newly published book that China’s potential growth would be close to 6 per cent in 2021-2025 and it could set an annual growth target of 5.5 per cent for the period.
“We expect the recovery will continue, lifting full-year growth at 2-3 per cent and approaching the potential growth rate next year,” the research said.
China looks beyond GDP growth rate as Beijing outlines five-year plan and 2035 vision amid rivalry with US
Despite the challenge posed by the ongoing tensions with the US, the country’s economy could still benefit from the development of next generation technology in areas such as information technology, energy and manufacturing.
Zhu Baoliang, head of the State Information Centre’s forecast department, said last month that China can maintain an average annual growth of 5 per cent all the way to 2035.
But Zhu said China must make deep-rooted changes in its economic system to achieve that.
“A core task is to correct the distorted factor market through reforms such urbanisation, land, capital market, interest rate and exchange rate,” according to a speech published online.
For the next five years, Zhu said an annual target of 5.5 per cent would be suitable.
Meanwhile, Morgan Stanley researchers led by chief China economist Robin Xing predicted the next five-year plan would set an average growth target of 5 per cent compared with the current figure of 6.5 per cent.
“This means a shift in policy focus to a structural boost in domestic consumption and further market-opening measures,” the report said.
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