But it is the direction of China’s economy that is the more critical message.
On March 5, Chinese Premier Li Keqiang announced during his government work report that this year’s GDP (gross domestic product) growth target was set at more than 6%. But it is the direction of China’s economy that is the more critical message.
This year is the opening year of the so-called 14th Five-Year Plan and the 100th anniversary of the founding of the Communist Party of China. The two sessions of the Chinese Communist government, which are collectively known as the National People’s Congress (NPC) and the Political Consultative Conference (CPPCC), have been held since 1959.
On March 5, Li Keqiang released a government work report showing that China has set a GDP (gross domestic product) growth target of more than 6 percent among the main expected targets for economic and social development in 2021. “Economic growth is a comprehensive indicator, and this year’s expected target is set at more than 6 percent, which takes into account the recovery of economic operation and is conducive to …… development.”
The government work report shows that this year’s fiscal deficit rate is to be arranged at around 3.2%, and will arrange for the issuance of 3.65 trillion yuan of new local government special bonds, compared to 3.6% and 3.75 trillion respectively last year.
In addition, Li Keqiang mentioned the need to add urban employment to more than 11 million people and maintain the urban survey unemployment rate at about 5.5% and consumer price (CPI) increase of about 3%.
However, in the view of analysts, this target is definitely achievable because the COVID19 Epidemic hit the economy hard last year, resulting in low GDP growth set, and with the low base, this year’s GDP target can be easily reached. However, economists say this is all meaningless.
According to Reuters, Commerzbank Asia senior economist Zhou Hao said, “This target of 6% or more is actually a target that doesn’t make much sense because it will definitely be accomplished, but what is being told is that the target has not been abandoned and there will probably still be a target for next year. No target last year is just an extraordinary state, the norm is still a rough range of economic growth, which is actually to match the plan of the long-term goal in 2035.”
Standard Chartered Bank chief economist and head of Greater China Research Ding Shuang said economic growth is easy to achieve, “This target is more for a convergence of the 14th Five-Year Plan, for the later years, so the annual economic growth target during the 14th Five-Year Plan will still be there, but if the first year target is set too high, it is not very good to set later.”
Previously, economists have also continued to call for the abolition of the official assessment target of GDP first. For example, Ma Jun, a member of the Monetary Policy Committee of the Central Bank of China, said that an economic bubble has emerged and GDP growth targets should be abolished.
“I personally believe that the GDP growth target should be permanently abolished from this year onwards, and that stable employment and Inflation control should be the main macro policy objectives,” Ma Jun said in an article recently.
Ma Jun believes that if GDP growth is an official target, there may be a habitual cascade of local governments to set local GDP targets high, thus increasing the financial risk of hidden debt, because it is easier to achieve investment to boost GDP by borrowing money than any other way.
And Ma Jun mentioned that “the GDP growth rate in 2020 there is a large base effect, because of this base effect, this year’s GDP may reach 8.5%, then should the target for 2021 to 8.5%? If it’s set, and it suddenly drops to 5.5 percent in 2021, it’s a lot of work to explain.”
Former Chinese finance minister Lou Jiwei also said at a forum referring to economic development targets that he did not advocate setting GDP growth targets because the previous habit of setting targets distorted macro policies. It is easy to cause strong investment pull. It leads to setting targets at every level and pressing targets at every level above.
And recently all Chinese provinces and cities have released their local GDP growth targets, with Beijing, Shanghai, Guangdong and Liaoning setting their 2021 economic growth targets at 6% or more. In addition, Hunan set its GDP growth rate at more than 7%, Yunnan at more than 8%, Tibet at 9%, and Hubei and Hainan set their economic growth targets at more than 10% this year.
In fact, what is more important than the GDP target is the future economic trend. Ren Chongdao, a researcher at Tianjun Political and Economic Think Tank, pointed out that it is difficult for the economy to pick up without the long-standing ills of the Chinese economy going. This malady is the deteriorating business environment, especially private enterprises have become lambs to the slaughter. When the local government invites investment, it promises to provide lenient conditions and environment for private enterprises. However, after some enterprises have invested heavily to start operations, local governments often change their faces or even flip-flop for various reasons, and the original promise becomes a blank check, and some enterprises fall into a predicament.
In addition, the total economic volume and fiscal capacity of Chinese provinces and cities show that the combined GDP figure of Guangdong (mainly the Pearl River Delta region), Jiangsu, Zhejiang and Fujian is 32,199.7 billion yuan, accounting for 31.69% of the total national GDP; the combined local fiscal revenue of the four provinces is 3,230.9 billion yuan, accounting for 32.26% of the total fiscal revenue of all provinces and cities in China.
This indicates that the southeastern coastal provinces have fully established an expansionary economic model: the market for goods and services continues to expand overseas and to the mainland, while internal investment activities advance in parallel, which in turn attracts a constant inflow of production factors (mainly human resources and capital) from other regions. When there is a decline in population and an acceleration in the rate of population aging, there is a big tilt with population and industry.
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