Now they tell us. It was only a suggestion.
China never said the economy must grow at 7% this year Premier Li Keqiang announced before this week’s annual meeting of the Chinese communist party, where they plan to set the direction for China’s 13th five-year plan.
“We have never said that we should defend to the death any goal, but that the economy should operate within a reasonable range,” said Li in a statement.
The five-year plan will set the economic and social targets for the next five years.
It’s amusing to watch the Chinese authorities learn that a major part of economic forecasting is learning how to “fudge” the numbers, that is make it seem like this unwelcome outcome is what you expected all along.
To put it all in context, China has been one of, if not the, fastest growing economy in the world creating huge demand for all kinds of commodities as it exported its cheap goods around the world.
From 2009 to 2014 China’s annual average gross domestic product was 8.7% its contribution rate to world economic growth exceeded 30% during the period, said China Daily, or 12 percentage points more than the 18% by the US.
But over the past few years, the world’s second-largest economy started to slow down. It happens to the best of economies and many pundits around the world worried that there would be a huge drop off, or steep slowdown into a “hard landing.”
The issue is while the global economy has been slow to recover in the wake of the 2008 fiscal crisis, with economic slowdowns in Europe and other emerging economies, the Chinese have been trying to transition away from an economy driven by exports and government spending to one based on consumption by domestic consumers. It’s not an easy transition to make in the best of times and the Chinese don’t spend their money as recklessly as Americans.
China’s economic growth has not been bad over the last year considering the problems in the global economy, Li said
So, when the Chinese said at the beginning of 2015 that their economy would grow 7% this year, people were already worried. It was a significant drop off from the year before, but not enough to signify a meltdown.
The first half of the year came in on target, but then China experienced it’s own mini financial meltdown over the summer. Its stock market lost all its gains for the year, it had to devalue its currency, and the central bank cut interest rates for the sixth time in a year last Friday.
A slew of economic reports over the summer showed everything was slowing down, because well, you can’t run at 100 mph all day every day. Around this time, government officials who in the past would have been able to manipulate the economy to meet projections began to get worried themselves and started to say that the economy would grow “around” 7%.
“Around” is a pretty flexible number. SO, when third-quarter growth was reported last week at 6.9%, the authorities could say their estimates weren’t wrong.
So, now Li needed to make clear the government had never said the economy would grow at a hard 7%. He made the comments after a top official of the People’s Bank of China said on Saturday that China would be able to keep annual economic growth at around 6% -7% over that period over the next five years.
Beijing needs average growth of close to 7% over the next five years to hit a previously declared goal of doubling gross domestic product and per capita income by 2020 from 2010, reported Reuters.
Asia Unhedged has been and remains an unabashed bull on the Chinese economy. China continues to be one of the fastest growing economies in the world even after the slowdown, much faster than both Europe and the US. And over the past year China has created international investment banks to build closer economic ties with more nations. In addition, it’s leading the ambitious “One Belt, One Road” program which plans to build physical and cyber infrastructure to increase trade with Europe, Africa and the Indian subcontinent. So, we’re okay with around 7%.