Reforms seen as key focus but growth safeguarded

Reforms will be the top priority next year but the government will not allow growth to slip below 7 per cent, said one of the main authors of the reform plan crafted at the third plenum and adopted as the core for the targets agreed by the Central Economic Work Conference this month.

"Next year is a year of reform. But one important consideration when taking reform steps is to make sure that they are conducive to growth," Liu Shijin, the deputy head of cabinet think tank Development Research Centre, told the South China Morning Post in an interview.

Some economists are concerned that priority given to speeding up reforms - including an overhaul of the hukou household registration system, land policy, the liberalisation of capital accounts and interest rates, and the opening up of state sectors to private investors - will cut government revenues, raise corporate funding costs and pull down economic growth next year. Such fears exist alongside a recognition by many that these moves may ultimately help the economy gain a more sustainable footing.

But Liu said policy reforms would be positive for short-term growth, which was likely to stay above 7 per cent - helped, if needed, by increased government investment spending.

To make room for reforms, some economists expect Beijing to set a lower target for growth next year of 7 per cent from this year's 7.5 per cent.

Though Liu would not elaborate on this, he said the leadership would have greater tolerance for slower economic growth next year after this year's 7.5 per cent. Growth above 7 per cent is seen as sufficient to create enough jobs and keep companies profitable while preventing the books of the government and banks from worsening.

The mainland economy expanded 7.7 per cent in the first three quarters of this year after hitting a 13-year low of 7.8 per cent last year.