China’s Premier Wen Jiabao is seen signaling next month that curbing pollution, inequality and the risk of financial instability eclipse the benefits of faster economic growth, a survey of analysts indicated.
Wen will target an expansion of less than 8 percent in his report to the National People’s Congress in Beijing on March 5, the equivalent of the U.S. President’s State of the Union address, according to 8 of 15 economists surveyed by Bloomberg News. The median estimate of 7.5 percent compares with the 8 percent goal maintained from 2005 to 2011, even amid the 2008-09 world recession.
A cut may indicate policy makers are prepared to tolerate a slower expansion as they move the economy’s drivers to consumption from exports and investment, a shift that may address global imbalances blamed for the last financial crisis. The survey results tally with state economist Fan Jianping’s prediction last week that a reduced goal will be set to send a message to local officials bent on chasing growth.
“A lower target should be seen more as a signal that there’s more emphasis on economic transformation and quality of growth over speed rather than a real goal,” said Ding Shuang, a Hong Kong-based economist with Citigroup Inc., who previously worked for the International Monetary Fund and China’s central bank. “Slower growth could provide more room to proceed with reforms that are required for rebalancing.”
Energy, Pollution
Average annual growth of 10 percent in the past three decades turned the nation into the world’s biggest emitter of carbon dioxide in addition to the second-largest economy and top exporter. The nation overtook the U.S. in 2009 to become the biggest energy consumer, according to the Paris-based International Energy Agency, a description China rejected.
As the Communist Party prepares for President Hu Jintao and Wen to hand over to a younger generation of leaders, officials aim to limit discontent over home costs, land seizures and the gap between rich and poor.
Gross domestic product expanded 9.2 percent in 2011 from 10.4 percent the previous year, as the government wound back stimulus measures and cracked down on property speculation. The nation’s five-year plan running through 2015 targets an average 7 percent expansion. Such goals are routinely exceeded and growth reached 14 percent as recently as 2007, according to the statistics bureau.
‘Didn’t Translate’
“For most people in China, the stellar double-digit growth rates of a few years ago didn’t translate into equivalent increases in income or spending,” said Mark Williams, a London- based economist at Capital Economics Ltd. who formerly advised the U.K. Treasury on China. Benefits would flow through “if the balance of the economy shifted towards services, light manufacturing and other areas that create a lot of jobs,” he said.
Wen has described China’s growth model as unstable, unbalanced, uncoordinated and unsustainable, a phrase echoed by Jin Qi, an assistant governor of the central bank, as recently as last week. In last year’s work report, the premier highlighted resource and environmental constraints, an imbalance between investment and consumption, the wealth gap, and uneven development of urban and rural areas.
Signs of unrest have included December’s two-week blockade of the village of Wukan in Guangdong, linked to residents protesting disputed land sales and the death of a local man in police custody.
‘Stained With Blood’
A high-speed rail crash last July killed 40 people, prompting the People’s Daily, a Communist Party mouthpiece, to call for economic development that is not “stained with blood.” Pollution incidents this year include a cadmium spill in Guangxi province that threatened the drinking water of millions of people.
China’s Gini coefficient, an income-distribution gauge used by economists, has climbed to near 0.5 from less than 0.3 a quarter century ago, according to Li Shi, a professor of economics at the School of Economics and Business at Beijing Normal University. The measure ranges from 0 to 1, and the 0.4 mark is used as a predictor by analysts for social unrest.
So-called mass incidents, including strikes, riots and other disturbances, doubled to at least 180,000 in 2010 from 2006, according to Sun Liping, a sociology professor at Beijing’s Tsinghua University.
“What’s sustainable is growth that’s more inclusive, less energy intensive and less polluting,” Murtaza Syed, the IMF’s resident representative in Beijing, said in an interview yesterday. “You can keep growth very high by investing a lot but you create a problem in the medium term that could actually lead to a slowdown that’s very, very severe over the next 10 to 15-year horizon.”
Rural Poor
The government’s efforts to help the worst-off citizens have included raising the rural poverty line so 128 million people are eligible for subsidies, and pledging to build 36 million units of low-cost housing from 2011 to 2015.
Fan, the chief economist at the State Information Center, said this year’s growth target may be 7 or 7.5 percent to “act as guidance for local authorities to not focus on chasing speed.” In other forecasts from the survey of analysts, a majority said the nation’s inflation target will be set at 4 percent, the same as last year.
--Zheng Lifei. With assistance from Ailing Tan in Singapore, Victoria Ruan and Nerys Avery in Beijing. Editors: Paul Panckhurst, Nerys Avery
