China’s premier: Growth of 6.5 percent expected through 2020

China’s President Xi Jinping, in announcing the 13th five-year plan (FYP) on Tuesday, said China’s growth target will be 6.5 per cent over the next five years, as reported by Bloomberg.

Last week, ruling party abandoned its 35 years old one-child policy.

China’s latest five-year plan, the details of which were endorsed at last week’s fifth plenum, aims to double the nation’s GDP and per capita income by 2020 (from 2010 numbers).

“It’s possible for China’s economy to maintain growth of around 7% in the future, but it also faces more uncertainties”, Mr Xi said, saying that main domestic and foreign research institutions believe China’s potential growth could be between 6% and 7% in 2016-20.

But authorities fear that losing control of the yuan’s value will mean giving up a powerful tool for managing the economy, which last quarter experienced its slowest growth in six years. As he points out, while annual growth now sits at 6.9%, the economy is far larger than in prior years.

“The growth pattern is truly changing from an investment, export-led economy to a domestic consumption, services-driven one, leading to slower albeit healthier growth”, said Livio Ribeiro, an economist at the Getulio Vargas Foundation in Brazil, in an interview with Xinhua.

The central People’s Bank of China adjusted the central rate of the yuan upwards by 0.54 per cent against the United States dollar, the statement said.

“Unfortunately, I fully expect the priority of growth to supersede any reform or rebalancing”, said University of California San Diego professor Victor Shih. “We do have concerns about the Chinese economy, and we are working hard to address them”. Targeting a growth rate leaves them open to the risk of losing credibility if they get it wrong.

Although no numerical targets were offered, President Xi Jinping expounded in a later explanation that annual growth of 6.5 percent would be required for China to “build a moderately prosperous society” by 2020. A few say a more realistic level would be 5.5% to 6%, which still would rank China among the fastest-growing countries in the world.

All such calculations stem from longstanding CPC promises related to jobs, per capita income and doubling China’s 2010 GDP by 2020. China enjoyed double-digit annual growth between 2003 and 2007, and 2014’s 7.4 percent jump was still significantly higher than the global average, even though it was China’s worst year in more than two and a half decades.

“China will most likely buy much more food and services by the end of this decade”.

However, Mr. Keqiang unveiled the target growth rate while addressing business leaders this week in Seoul, South Korea.

A five-year numerical target also presents a problem if China’s growth rates continue to decline, since it could imply economic contraction in later years, putting increasing pressure on the government.

A map unveiled by Xinhua shows the Chinese plans for the Silk Road run through Central China to the northern Xinjiang from where it travels through Central Asia entering Kazakhstan and onto Iraq, Iran, Syria and then Istanbul in Turkey from where it runs across Europe cutting across Germany, Netherlands and Italy.

In other words, the yuan is underrepresented in payments and reserves relative to its share of world trade, while the dollar is similarly overrepresented, due to the popularity among investors and governments of the US’ broad, liquid and secure capital markets.

Mr Xu told a news conference that the government would give more attention to employment, incomes and consumer prices than economic growth figures.