China urged to rethink growth goal
Print Edition
THE World Bank has warned that China’s current focus on meeting official growth target will hinder its reform to rebalance growth toward a more sustainable model.
In its China Economic Update released yesterday, the bank acknowledged China has made progress this year in implementing reforms to restructure its economy, but challenges remain.
“The current emphasis on meeting short-term growth targets will make it more challenging to implement the policies necessary to shift growth to a more sustainable medium-term path,” the bank said.
It cautioned China against taking expansionary policies to meet ambitious growth targets. Instead the country should reserve its policy buffer to maintain macro-economic stability in case of unexpected domestic or external economic shocks, the bank advised.
Earlier this month, the bank cut its forecast for China’s economic growth in 2014 to 7.4 percent from the previous 7.6 percent, still in line with the government’s growth target of around 7.5 percent.
The bank expects China’s economic growth to slow to 7.2 percent in 2015 and 7.1 percent in 2016 as structural reforms intensify. It had previously projected the economy to grow 7.5 percent in 2015 and 2016.
China has deepened efforts to tighten credit growth, cut overcapacity and strengthen control over local government debts as it strives to shift the economy toward a consumption-based model. The government has also pushed forward reforms of the fiscal system, land and state-owned enterprises.
But the World Bank noted these reforms will not reverse a moderation of China’s economic expansion over the next decade.
China’s economic growth slowed to 7.3 percent in the third quarter of this year, the slowest pace in five years, amid a sluggish real estate market and weak domestic demand.
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