BEIJING (Reuters) – China’s leaders should cut next year’s economic growth target to seven per cent, according to influential advisers recommending the country’s leadership which was meeting on Tuesday to map out economic and reform plans for 2015.
China looks set to miss its growth target this year for the first time since 1999, and full-year growth is likely to be theweakest in 24 years. The government last cut its annual growthtarget in 2012, to 7.5 per cent from the 8 percent it had kept for eight years.
Government-run think-tanks, which are influential in the decision-making process but do not wield power themselves, plan to recommend that Beijing reduce its official 2015 GDP growth target to seven per cent from 7.5 per cent this year, sources said.
“President Xi (Jinping) has already hinted at the growth target when he said growth of seven per cent is the highest in theworld,” said a senior economist at the Chinese Academy of Social Sciences (CASS), who declined to be named.
“I think it should be seven per cent if there are no more surprises. But it can’t be lower than seven per cent, otherwise there could be employ-ment problems and debt default problems.”
China’s reform-minded leaders have shown greater tolerance for slower growth, but will have to tread carefully to avoid a sharper slowdown that could fuel job losses and debt default risks, analysts say.
The annual Central Economic Work Conference, which state radio said meets from Tuesday, may reiterate a prudent monetary policy, but the sources believe the underlying tone could be accommodative to ward off a sharp growth slowdown.
Economists expect policymakers to embark on their biggest easing campaign since the global financial crisis, forecasting a combination of more rate cuts and reductions in bank reserve requirements to encourage lending despite mounting bad loans.
After months of saying major stimulus wasn’t needed, the central bank surprised markets on Nov 21 by cutting interest rates for the first time in more than two years to shore up growth and lift some of the pressure off debt-laden companies.
Economists believe the move signalled policymakers’ concern over a sharper slowdown, even as Xi talks about a “new normal”, that China should adapt to slower, but more sustainable, growth after three decades of breakneck expansion.
The People’s Daily, the Communist Party’s leading paper, said in a commentary that the government’s efforts to support growth and reforms were equally important. “The new normal does not mean growth is not needed. Reforms lack basic premise if growth is not stable,” it said, adding China should keep credit steady to support growth and curb systemic risks to avoid a “disruptive mistake”.