Chinese leaders will signal that growth is their priority over reform for the world’s second-biggest economy by setting a growth target of about 7 percent in their next long-term plan, even as the economy loses momentum, policy insiders say.
The Chinese Communist Party’s Central Committee is to meet from Oct. 26 to Oct. 29 to set out their 13th five-year plan, a blueprint for economic and social development between next year and 2020.
While the government has flagged a “new normal” of slower growth as it tries to shift the economy to sustainable, consumption-led growth, official data shows it has consistently at least met, and mostly exceeded, the growth targets it sets.
“We will have to rely on policy stimulus to safeguard the 7 percent growth target,” an economist from a government think tank said. “We should not put financial liberalization at the forefront of economic reforms.”
Beijing needs average growth of close to 7 percent over the next five years to hit a previously declared goal of doubling GDP and per capita income by 2020 from 2010.
However, a plunging stock market and the unexpected fallout from a modest devaluation of the yuan have raised fears among policymakers that an abrupt slowdown in growth could spark systemic risks and destabilize the economy.
“It appears that growth has outweighed the reform agenda, which could stabilize the market for the short term while adding destabilization factors in the medium term,” Commerzbank AG senior economist Zhou Hao (周皓) said in Singapore.
The government is likely to boost infrastructure spending in the new five-year plan, a favored means of stimulus in China, under Beijing’s push for regional integration and the “New Silk Road” scheme, to try to meet an earlier growth target set for the current decade.
While the specifics remain vague beyond the intention to build out road, rail and building infrastructure projects across Central Asia, analysts also expect the plenum to contain a raft of environmental measures.
Power generation from renewable fuels is expected to be a central pillar of any such initiatives, which would likely boost demand for copper and aluminum in particular, as power grids are upgraded and connected to solar, wind and hydroelectric power projects.
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