My Take | China can afford to abandon its GDP target, but not its promise of economic growth
- With the exception of 2020, China had never given up on trying to reach its annual economic growth target in the past several decades
- The GDP target is just a number, but it is the government’s thinking behind China’s economic growth that matters to citizens and businesses
With the exception of 2020, when China did not set an economic growth target because of the Covid-19 pandemic, the country has indicated an annual GDP goal every year for the past decades to let the world know about its general view on the national economy.
Once the target was set, the government had always delivered, with the rare exception of 1998, when China’s GDP growth was just 0.2 percentage point shy of the target of 8 per cent, as Chinese exports were hit by the Asian financial crisis.
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China aims for modest 5.5% GDP growth in 2022, citing economic pressures
That slight miss was enough to trigger a drastic economic policy response from then-Premier Zhu Rongji.
Special treasury bonds were issued, inefficient state enterprises were shut down, and the property market was given unprecedented freedom. Consumers were encouraged to spend – a deviation from the traditional Chinese virtue of saving up – and the country pushed hard to enter the World Trade Organization.
But China’s priorities are very different now. The country’s speed of economic growth is no longer seen to be as significant as the quality of growth. With many economists predicting a GDP growth of between 3 and 4 per cent this year, an annual increase that falls just 0.2 percentage points short of the original target would probably be a cause for celebration.
The real concern about China’s economic future, however, lies not in the numbers themselves but the leadership’s thinking behind them. There are already signs of public unease about Beijing’s deviation from its long-held strategy of “putting economic construction at the centre” and the pragmatism underlining that.