China lowers growth rate target in sustainability drive

[p2prada]

http://www.bbc.co.uk/news/world-asia-pacific-12589757

China lowers growth rate target in sustainability drive

China's Prime Minister Wen Jiabao says China is lowering its annual economic growth target from 7.5% to 7% and is determined to contain soaring prices.

He was speaking in a question and answer session with internet users in what has become an annual online chat.

Mr Wen said China needed to ensure that growth was sustainable.

Inflation is officially running at almost 5% but food prices have surged by 10%, creating public discontent.

The lowering of the growth rate is mainly symbolic - as economic growth has exceeded the 7.5% target every year in the last six years.

Last year, growth reached 10.3%, making China the world's fastest-expanding major economy.

But along with the breakneck growth have come price rises, particularly for food and housing, which the prime minister acknowledged were affecting people's livelihoods and even social stability.
'Quality' growth

Mr Wen said the growth rate change would "raise the quality and efficiency of economic growth" and conceded that one factor was the impact on the environment.

"We absolutely must not any longer sacrifice the environment for the sake of rapid growth and reckless roll-outs," said Mr Wen. "That will lead to production capacity gluts and deepening pressure on the environment and resources so that economic development will be unsustainable."

He said the purpose of economic development was "to meet the people's growing material and cultural needs, and make the lives of commoners better and better."

Maintaining social stability was also central to the country's foreign exchange policy, said Mr Wen, requiring a step-by-step increase in yuan flexibility so that Chinese businesses could adapt to the changes.

The premier also said Beijing was determined to stamp out corruption - citing the dismissal last week of Liu Zhijun, the former railways minister, who is being investigated by the Communist Party's corruption watchdog.

Mr Wen's online session comes ahead of the annual parliament session from 5 March.

Correspondents say his comments reflect the anxiety of China's leadership about discontent over price rises.

A recent online appeal urged people to come out for low-level "strolling" protests every Sunday afternoon.

The authorities responded by deploying hundreds of police city centre sites in Beijing and Shanghai.

In Shanghai they used street-cleaning vehicles to keep passers-by moving and tried to prevent journalists taking photographs.

In Beijing, the intended protest spot was fenced off. A BBC crew was briefly detained when they tried to film police clearing the area.

This is something really interesting to note. China is self curtailing high growth as a measure for sustainability in the long run. With inflation at 5% and food inflation at 10%, there is no point in high growth if the per capita income is lower than what is necessary. Looks like they will stop blind investment in infrastructure. Perhaps take a leaf out of Indian books and build only after creating the market for it. It's slower but has higher returns.

 

[cw2005]

I thought India's CPI is higher than China's and People here are still talking of overtaking China's growth rate. Of course we may always say China's CPI is artificially "made" low by the Government.

 

[p2prada]

Indian CPI for durables is only marginally higher while for electronics and other stuff, it is a bit more. But I don't see why they are a major problem for us. Afterall the tax earnings on higher CPI is obviously good for GDP.

Consumer products are mostly made in China and also Chinese food supply is greater compared to India's. So, CPI obviously lower than India. Subsidies provided by CCP is also higher in China compared to Indian govt subsidies.

These are parameters that will improve over time. Our per capita income is set to double every 9 years, which is quite significant. So, managing adequate supply for greater demand is a headache that we will have to manage as does everybody else in the world. It has become an issue for your country as well and that's why we see China curbing growth to reduce effects of inflation on GDP. India has always had a higher inflation rate compared to China in the recent past.

Our economy is not as dominated by the industry as yours is. Also, we are going to have to increase food production over the next decade which is very crucial. Both these sectors have to have a greater share in the GDP if we are going to have to compete with China in the long run. Both sectors are the best way for us to reduce our fiscal and current account deficits. Industry and food also increases trade which further helps reduce deficit.

 

[Daredevil]

http://www.bbc.co.uk/news/world-asia-pacific-12589757



This is something really interesting to note. China is self curtailing high growth as a measure for sustainability in the long run. With inflation at 5% and food inflation at 10%, there is no point in high growth if the per capita income is lower than what is necessary. Looks like they will stop blind investment in infrastructure. Perhaps take a leaf out of Indian books and build only after creating the market for it. It's slower but has higher returns.

So finally China has come into its senses on its mindless growth with almost no returns on the investment and has to fall back on Indian growth rate kind of scenario. It needs to be seen how they will tackle the unemployment/joblessness due to lowering of growth rate targets.

 

[badguy2000]

well, the shortage of blue-collar labour in CHina suggests that CHina's potential growth now might decrease

now, China's nominal per capital GDP is about 5000 USD. I think that CHina can still keep growing about 8% before its capital GDP surpasses 10K USD.


After CHina's per capital GDP surpasses 10K USD, CHina's economic growth might decrease to about 5-7%.

HOwever, until CHinese's nominal per capital GDP is to equal to USA or EU's, CHina economy will still grow faster than both EU and USA.

 

[kickok1975]

It's better to have a slower, steady but healthy growth than a fast, dramatic but costly leap. The environment in China today is unrecognizable compare to 20 years ago. Millions of people died every year of cancer, food poison and other diseases directly or indirectly related to pollution.

We just can't develop in such way and no longer could afford such damages which would take generations to repay. I would say it's a wise decision.

 

[p2prada]

well, the shortage of blue-collar labour in CHina suggests that CHina's potential growth now might decrease

now, China's nominal per capital GDP is about 5000 USD. I think that CHina can still keep growing about 8% before its capital GDP surpasses 10K USD.


After CHina's per capital GDP surpasses 10K USD, CHina's economic growth might decrease to about 5-7%.

HOwever, until CHinese's nominal per capital GDP is to equal to USA or EU's, CHina economy will still grow faster than both EU and USA.

GDP growth or should I say govt spending is going to come down by some points. I doubt your policy makers are waiting for $10k USD per capita to take such risks. Your inflation rate at 5% is going in the same direction as India's. Maybe it does not make a difference to you, your earning will be greater than $10K USD/year, but the average folk is going to be haunted by the increase in prices.

The day China crosses $10K in per capita then your economy has already surpassed US in terms of GDP. Are you really willing to allow inflation to spiral up until then?