Finance chief allays fears over slide in China growth rate

Expansion as weak as 6.5pc 'not a big problem', says Lou Jiwei, after suggesting figure for the second quarter could be lowest since 1990

PUBLISHED : Saturday, 13 July, 2013, 12:00am
UPDATED : Saturday, 13 July, 2013, 6:04am

China is on course to record its weakest economic growth for nearly a quarter of a century, but expansion as low as 6.5 per cent can be tolerated, finance chief Lou Jiwei said yesterday.

Analysts have slashed forecasts for the second quarter gross domestic product, due to be announced on Monday, after the release of a series of worse-than-expected economic indicators.

And investors have puzzled over exactly what lower level of growth would trigger economic stimulus from Beijing.

Speculation increased after Premier Li Keqiang said earlier this week: "As long as the economic growth rate, employment and other indicators don't slip below our lower limit and inflation doesn't exceed our upper limit, [we will] focus on restructuring and pushing reforms."

But Lou , speaking on the sidelines of the US-China strategic and economic dialogue in Washington, said: "We don't think 6.5 per cent or 7 per cent will be a big problem." Lou was quoted by Bloomberg as saying: "Our expected GDP growth rate this year is 7 per cent."

That is below Beijing's official 7.5 per cent goal for the year and would be the slowest since 1990.

Zhang Zhiwei, chief China economist at Nomura in Hong Kong, doubted that Lou's estimate constituted a new official target, given that the National People's Congress approved the 7.5 per cent rate four months ago.

"A revision of the official growth target may require NPC approval, so we regard the quote with caution," Zhang said.

Xinhua later amended its original report to show Lou saying growth would be 7.5 per cent this year. But investors rattled by Lou's remarks sold China shares.

The CSI 300 index of the leading stocks listed in Shanghai and Shenzhen was the region's worst performer, falling 2.2 per cent.

Average annual growth of 7 per cent is targeted in the 12th five-year plan through to 2015.

The market consensus is that growth slipped to 7.5 per cent in the second quarter from 7.7 per cent in the first three months.

A 7 per cent expectation for the full year would imply growth of about 6.4 per cent in the second half of this year - far short of what most analysts believe is needed to create sufficient jobs to guarantee social stability.

It is also close to the level analysts have associated with a "hard landing" of the economy.

Government rhetoric so far has focused on structural economic reforms to put growth on a sustainable, long-term footing.

Separately, China said yesterday it will speed the development of its "energy-saving industry" and promote the consumption of IT related products to spur domestic demand, according to a statement following a State Council executive meeting.