China’s government may cut the country’s annual growth target to 7 percent next year, although the actual pace of expansion will be higher, said Fan Jianping (范劍平), chief economist at a state research institute.
The drop would be in line with the goal set in the country’s 2011-2015 five-year plan for annual average expansion of 7 percent, Fan, who works at the state information center under the National Development and Reform Commission, said yesterday.
China’s economy is set to expand 7.5 percent this year, matching the government’s target set in March and the weakest pace in 23 years, amid curbs on credit expansion, property development and overcapacity. Chinese President Xi Jinping (習近平) said this week the government chose to bring down the growth rate to solve “fundamental problems,” hindering long-run development.
“It’s hard to find good reasons to be optimistic” about a recovery in China’s growth, Zhang Zhiwei (張智威), chief China economist at Nomura Holdings Inc in Hong Kong, said on Friday. “The economy has been pretty much supported by investment, especially property and infrastructure, but it’s hard to see how the momentum can continue.”
Zhang, who sees “moderate upside risks” to his third-quarter growth estimate of 7.4 percent after better-than-expected economic data, said he is maintaining his forecast for next year of 6.9 percent as the current recovery is unsustainable.
China’s economy has stabilized “but rising industrial output and a falling producer prices index shows the recovery lacks momentum,” Fan said in Shanghai. The country’s capacity utilization rate is now running at about 72 percent, he said.
GDP rose 7.5 percent April to June year-on-year, the second straight quarterly slowdown. Industrial output, export data, and monthly purchasing managers’ indexes have strengthened since July, bolstering confidence that Chinese Premier Li Keqiang’s (李克強) policies have stabilized the economy.
Goldman Sachs Group this week joined JPMorgan Chase and Deutsche Bank AG in raising its third-quarter growth estimate. The bank forecasts expansion of 7.7 percent, up from a previous 7.3 percent, and sees fourth-quarter growth of 7.4 percent, up from 7 percent.
China’s annual growth rate will stay in a range of 7 percent to 8 percent over the next few years and the government should use this window to speed up economic restructuring, Fan said.