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Slower growth means better quality of economy
Source: Xinhua |
March 10, 2011, Thursday
|
Print Edition
Print Edition
CHINA will seek lower economic growth in the coming five years as the constant pursuit of rapid expansion in past years has brought about unbalanced economic and social development.
China is targeting an annual average growth rate of 7 percent in the next five years to 2015, Premier Wen Jiabao told nearly 3,000 national legislators last Saturday.
During the 11th Five-Year Plan period (2006-2010), China's economy expanded at an annual average of 11.2 percent despite the global economic turmoil. Wen said on February 27 during an online chat with netizens that China must no longer sacrifice the environment for the sake of rapid growth.
"A lower growth rate leaves room for possible economic fluctuations during the five years in case global or regional economic crisis bites again," said Wang Jun, a macro-economic researcher with the China Center for International Economic Exchanges, a government think tank.
Other economists see kicking the addiction to fast growth as a sign of the government's determination to revamp the economy by reducing dependence on exports and capital- and energy-intensive industries.
China's stunning economic rise in recent years, always exceeding annual targets, has been pushed by local governments' racing to boost regional GDP growth by putting huge investments in capital- and energy-intensive industries.
The annual growth rate of over 9 percent in the past three decades has enabled China to take the place of Japan as the world's second largest economy after the United States. However, that success comes with heavy costs: pollution, a yawning wealth gap and corruption.
Premier Wen defined the development model as "unbalanced, uncoordinated and unsustainable."
With a lower economic target, the central government intends to make it clear to local leaders that property investment and energy-intensive industries should not be key drivers of economic growth, Wang Jun said. It also helps ease local governments' pressure on seeking high GDP growth and competing for rankings in an effort to meet the official evaluation system, which places great emphasis on economic growth, he added.
The central government's decision to scale down the economic growth target is a guide to lower expectations for fast GDP increase, said Liu Zhiyan, an expert with the Chinese Academy of Social Sciences, a government think tank. The government wants slower growth in exchange for an upgrade in economic quality, he said. "It is hard to improve economic quality amid expectations of fast economic increase."
Higher local goals
It seems that local governments do not feel comfortable with slowing regional growth. According to their five-year growth targets unveiled prior to the central government's plan, 25 provincial regions out of 31 in the Chinese mainland set double digit growth rates for the 2011-2015 period. Local governments tend to set their goals higher than 7 percent to ensure their jobs are accomplished, said Tang Shibao, a senior executive of the Guangxi Beibu Gulf Bank. He called for the central government to reduce GDP growth as a major factor in assessing local governments.
A report from the ANZ Bank said that China's economy is expected to grow 9.6 percent in 2011. Commenting on the government's target of creating 45 million new jobs in urban areas in five years, Wang Jun said that if the service industry can be substantially expanded, it will create enormous employment.
The slower speed of China's growth has caused concerns from the outside world, as it indicates that China will reduce its demand for goods and commodities from other countries, which are struggling for recovery from economic recession. China has a huge appetite for foreign products, such as soybeans, clothes, iron ore and cell phones. Its economic boom has benefited many foreign companies.
"For China, the broader official agenda makes sense, especially if the government works on developing its own competence. The implications for foreigners are less clear," according to an article on the website of the Financial Times last Wednesday. The article noted that a slower growth rate might reduce trading opportunities and calm demand for commodities.
"A slower economic increase will affect the global economy, since China's demand is tremendous," Wang Jun said. It is understandable that foreign nations have such concerns.
However, China's push on improving economic quality will keep its growth more sustainable, which means more opportunities for the world will continue for a longer time, he added. He expected China's rapid growth to continue for the next 20 to 30 years as there are huge growth potentials in its industrialization, globalization and urbanization.
China is targeting an annual average growth rate of 7 percent in the next five years to 2015, Premier Wen Jiabao told nearly 3,000 national legislators last Saturday.
During the 11th Five-Year Plan period (2006-2010), China's economy expanded at an annual average of 11.2 percent despite the global economic turmoil. Wen said on February 27 during an online chat with netizens that China must no longer sacrifice the environment for the sake of rapid growth.
"A lower growth rate leaves room for possible economic fluctuations during the five years in case global or regional economic crisis bites again," said Wang Jun, a macro-economic researcher with the China Center for International Economic Exchanges, a government think tank.
Other economists see kicking the addiction to fast growth as a sign of the government's determination to revamp the economy by reducing dependence on exports and capital- and energy-intensive industries.
China's stunning economic rise in recent years, always exceeding annual targets, has been pushed by local governments' racing to boost regional GDP growth by putting huge investments in capital- and energy-intensive industries.
The annual growth rate of over 9 percent in the past three decades has enabled China to take the place of Japan as the world's second largest economy after the United States. However, that success comes with heavy costs: pollution, a yawning wealth gap and corruption.
Premier Wen defined the development model as "unbalanced, uncoordinated and unsustainable."
With a lower economic target, the central government intends to make it clear to local leaders that property investment and energy-intensive industries should not be key drivers of economic growth, Wang Jun said. It also helps ease local governments' pressure on seeking high GDP growth and competing for rankings in an effort to meet the official evaluation system, which places great emphasis on economic growth, he added.
The central government's decision to scale down the economic growth target is a guide to lower expectations for fast GDP increase, said Liu Zhiyan, an expert with the Chinese Academy of Social Sciences, a government think tank. The government wants slower growth in exchange for an upgrade in economic quality, he said. "It is hard to improve economic quality amid expectations of fast economic increase."
Higher local goals
It seems that local governments do not feel comfortable with slowing regional growth. According to their five-year growth targets unveiled prior to the central government's plan, 25 provincial regions out of 31 in the Chinese mainland set double digit growth rates for the 2011-2015 period. Local governments tend to set their goals higher than 7 percent to ensure their jobs are accomplished, said Tang Shibao, a senior executive of the Guangxi Beibu Gulf Bank. He called for the central government to reduce GDP growth as a major factor in assessing local governments.
A report from the ANZ Bank said that China's economy is expected to grow 9.6 percent in 2011. Commenting on the government's target of creating 45 million new jobs in urban areas in five years, Wang Jun said that if the service industry can be substantially expanded, it will create enormous employment.
The slower speed of China's growth has caused concerns from the outside world, as it indicates that China will reduce its demand for goods and commodities from other countries, which are struggling for recovery from economic recession. China has a huge appetite for foreign products, such as soybeans, clothes, iron ore and cell phones. Its economic boom has benefited many foreign companies.
"For China, the broader official agenda makes sense, especially if the government works on developing its own competence. The implications for foreigners are less clear," according to an article on the website of the Financial Times last Wednesday. The article noted that a slower growth rate might reduce trading opportunities and calm demand for commodities.
"A slower economic increase will affect the global economy, since China's demand is tremendous," Wang Jun said. It is understandable that foreign nations have such concerns.
However, China's push on improving economic quality will keep its growth more sustainable, which means more opportunities for the world will continue for a longer time, he added. He expected China's rapid growth to continue for the next 20 to 30 years as there are huge growth potentials in its industrialization, globalization and urbanization.
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