Tue, Jan 03, 2017 - Page 10 News List

PBOC adviser urges wider growth goal

CHINA’S ZOMBIES:A large number of companies are inviable, yet survive on bank and government assistance, bringing down the efficiency of the economy, the adviser said

Bloomberg

China should set a more flexible economic growth target for this year to give policymakers more room to enact reforms, People’s Bank of China (PBOC) adviser Huang Yiping (黃益平) said.

He proposed a range of 6 to 7 percent for this year, compared with the 6.5 to 7 percent objective last year, Xinhua news agency reported.

Last year’s target, the first range given in two decades, was down from 7 percent for 2015.

The country’s leaders also have a longer-term objective.

Chinese President Xi Jinping (習近平) has said he wants expansion to average at least 6.5 percent in the five years through 2020 to achieve the Chinese Communist Party’s promise of building a “moderately prosperous society” by that year with GDP and income levels double those of 2010.

“The 6.5 percent target is just an average rate,” Huang, an economics professor at Peking University, told Xinhua in an interview published late on Sunday. “As long as employment is stable, a slightly wider growth target range in the short term will reduce the need for pro-growth efforts and give policy makers more room to focus on reforms.”

Huang said a large number of “zombie companies remain economically inviable, yet still manage to survive on government and bank assistance, bringing down the overall efficiency of resource allocation in the economy.

In addition to slowing growth and rising debt, top officials are also trying to manage a smooth rebalancing from the old growth drivers such as manufacturing and construction as new ones like consumption struggle to compensate.

Meanwhile, policymakers are focusing more on safeguarding the financial system. Preventing and controlling financial risk to avoid asset bubbles will be a priority for this year, along with deepening supply-side structural reform, top party officials said recently after their annual gathering of the Central Economic Work Conference to decide on policy goals.

Xi is open to growth below the 6.5 percent target due to rising debt and concern about an uncertain global environment after US president elect Donald Trump’s victory at the polls, a person familiar with the situation told Bloomberg News last month.

Hitting the target is not needed if doing so is too risky, said the person, who asked not to be named because the discussions were private.

China is poised to abandon its longer-term growth target in the next two years as leaders push to contain asset bubbles and financial leverage, Yao Wei (姚偉), chief China economist at Societe Generale SA in Paris, wrote in a report last week.

She said the 6.5 percent goal would likely be lowered to a range of 6 to 6.5 percent, or even 5.5 to 6.5 percent.

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