Coronavirus: China should drop 2020 GDP target as pandemic stokes uncertainty, says central bank adviser
- Central bank adviser Ma Jun says China should not set an economic growth target this year due to damage caused by the coronavirus pandemic
- Even GDP growth of between 4-5 per cent will be difficult as the pandemic spreads in the US and Europe, Ma says
A prominent adviser to China’s central bank has suggested the government drop a specific growth target for 2020 as the coronavirus outbreak has caused unprecedented damage to the economy, shedding light on the deep divide over policy in Beijing.
“China can hardly achieve the 6 per cent target because of the coronavirus pandemic,” Ma Jun, an academic member of the People’s Bank of China’s monetary policy committee, told the state-owned Economic Daily.
“It is also hard to maintain 4-5 per cent growth … because it will largely depend on how the pandemic develops in Europe and the United States.”
It is also hard to maintain 4-5 per cent growth … because it will largely depend on how the pandemic develops in Europe and the United States
President Xi Jinping has said China is still committed to its “economic and social development goals” and grand vision of building a “comprehensively well-off society” this year, which includes doubling gross domestic product (GDP) in the decade to 2020. That would require a minimum growth rate of about 5.6 per cent, analysts say.
But pursuing a high pace of economic expansion would “kidnap macroeconomic policies and eventually force the use of an all-out stimulus,” Ma said.
Ma has long called for Beijing to give up its GDP target, saying as early as 2017 that China should set a target around its jobless rate instead.
The World Bank on Tuesday slashed its baseline forecast for China’s growth this year to 2.3 per cent, from 6.1 per cent.
China International Capital Corporation, one of the country’s leading brokerages, estimated the pandemic could knock 6 percentage points from this year’s growth, and sharply lowered its forecast to 2.6 per cent from 6.1 per cent, despite growing fiscal support.
The government usually announces its annual growth target at the National People’s Congress, but this year’s gathering scheduled for March was postponed because of the outbreak.
While Xi tried to play down its significance, headline growth remains the single most important measurement for central and local government performance in China. In 2015, Shanghai gave up its GDP growth target, but the city resumed the tradition the following year.
But other analysts have called for China to carry on with its decades-old tradition.
Li Xunlei, chief economist at brokerage Zhongtai Securities, said a GDP target was needed to send policy signals to local authorities and investors.
Cancelling it “would only hurt the enthusiasm of local governments in resuming production” damaged by the coronavirus, Li said on Tuesday.
Qiu Xiaohua, the former head of China’s National Bureau of Statistics, wrote in a recent article that Beijing should clearly set a minimum target, and suggested it be 4 per cent for the year.
While debate continues, China’s government has stepped up support for the economy, which is now facing a second wave of shock as export orders vanish as the outbreak spreads in North America and Europe.
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