China will miss its growth targets ... but that’s OK, says boss of global consultancy
Oxford Economics chairman says China’s economy will still grow steadily for the next five years
China’s government and global markets shouldn’t worry about the nation missing annual growth targets of about 6.5 per cent over the next five years as the economy will still show steady expansion, according to the head of a global consultancy.
Growth is likely to hit about three to four per cent each year, still a strong showing, said John Walker, the chairman of Britain-based Oxford Economics.
“When you become a more developed economy, the growth rate comes down. So I don’t think they should get so hung up about 6.5 per cent,” he said.
“If growth slows to three to four per cent a year, that would be politically difficult for the government, but I don’t think it would be economically difficult for the government. That’s what economies do,” Walker said.
China is targeting annual growth no lower than 6.5 per cent through to 2020 to meet the Communist Party’s goal of gross domestic product per capita doubling this decade.
The target has come under increasing scrutiny as it may require the government to continue focusing on short-term growth and investment at the cost of much-needed economic structural reforms. China’s GDP grew 6.7 per cent in the first half of the year as the world’s second-largest economy continues to slow.
Walker, whose firm provides economic forecasting services, said China’s slowdown was set to continue as the country’s labour pool starts to shrink and the services sectors overtakes manufacturing and investment.
“The rest of the world shouldn’t be too worried with growth in China at three or four per cent as long as it’s growing and as long as those imbalances have been dealt with,” he said.
China’s rebalancing of the economy from a reliance on government investment, however, may worsen imbalances in the global economy, he said.
“The excess of savings is a bigger problem than other structural issues, from a global perspective,” he said.
“There are more savings in the world than there are investment opportunities to use those savings for and that has put down pressure on interest rates globally and on demand as well.
“China’s lesser dependence on investment for its growth will make that imbalance slightly worse,” Walker said.
The biggest risk for the global economy this year and next is Donald Trump getting elected US president, according to Walker as it “would be both a political risk and an economic risk”.
“If I was to choose another one, the problems we saw in Europe two years ago, fears of the breakup of the eurozone and the end of the euro, could return,” he said.