China signals slower growth is acceptable to tackle debt, smog

China can achieve a goal of doubling the size of its economy by 2020 even if annual expansion slows to 6.3 per cent, according to a senior Communist Party official, signaling a greater willingness to tackle debt and pollution at the expense of growth.

In its blueprint for 2016 to 2020, China set a minimum annual growth target of 6.5 per cent for the five-year period to achieve the goal of doubling gross domestic product (GDP) from 2010 levels. But over the weekend, Yang Weimin, an official from the Communist Party committee overseeing economic policy, said annualised growth of 6.3 per cent in 2018-2020 would do.

Based on current economic performance, the 2020 target won’t be a “huge barrier,” the official Xinhua News Agency cited Yang, deputy head of the Office of the Central Leading Group on Financial and Economic Affairs, as saying. China is seen growing 6.8 per cent this year and 6.5 per cent in 2018, according to economist estimates compiled by Bloomberg.

President Xi Jinping and other top leaders have likewise signaled less emphasis on growth, pledging earlier this month to focus on “critical battles” against financial risk, pollution and poverty in the next three years. Yang dismissed the notion that China would abandon a growth target before 2020 while investment banks including UBS Group AG see China potentially giving a 2018 target that is worded similar to this year’s “around 6.5 per cent” but without language that it should be higher if possible.

“What Yang Weimin said is no surprise except that he’s preparing for a publicly acceptable official soft landing for the already-determined policy,” said Chen Zhiwu, an economics professor at the University of Hong Kong. “The target growth rate for 2018 will be lower than 2017.”

GDP will reach 80 trillion yuan ($12.2 trillion) by year end, Han Wenxiu, deputy head of the State Council research office, said in a recent article in the official Economic Daily. The economy only needs to grow by 6.3 per cent a year and residential income by 5.3 per cent to reach the targets of doubling 2020 GDP and per capita income from 2010 levels, he said.

Yang’s remark is “a heads up on how the new thought will be implemented,” said Zhu Ning, deputy director of the National Institute of Financial Research at Tsinghua University in Beijing.