China’s state-led growth model to intensify in 2021 as ambitious provinces lay out growth targets
- China is celebrating its 2.3 per cent economic growth rate in 2020 having bounced back from the impact of the coronavirus at the start of the year
- Over the last few days, China’s provinces have outlined their economic and social development plans for the year ahead, including growth rate targets
A review of China’s provincial people’s congresses over the last couple of days has been like watching a competition of spending ambitions.
Guangdong is the most conservative among a dozen or so provinces and municipalities that have published their goals. The province, with an economic size on par with Canada, is aiming for only “a minimum growth rate of 6 per cent”, on par with the municipalities of Beijing, Shanghai and Chongqing.
Hubei, which was hit hard by the coronavirus in 2020, is aiming for 10 per cent growth, along with the tropical island of Hainan, which is striving to become an international free-trade port.
The central authority is expected to be largely accommodative this year, the year when the Communist Party will celebrate its 100th anniversary and is in need of a triumphant, festival and joyful atmosphere
Shanxi plans to grow its economy by 8 per cent, while Henan, where the world’s largest iPhone factory is based, is aiming for at least 7 per cent growth. Fujian has set its economic growth target at “about 7.5 per cent”.
In China’s state-led growth model, the drive from local authorities is important, and the shared desire among local authorities for accelerated economic growth in 2021 is not hard to understand as they are trying to make up lost time after the disruptions in early 2020.
Local governments have already aligned their plans with China’s national strategies. For example, as China is trying to upgrade its communication system, Henan plans to develop 50,000 5G base stations, Fujian 30,000, Guangxi 20,000 and Shanxi 15,000.
While the central government is unlikely to entertain all local ambitions, with the central bank in particular not in favour of bankrolling local spending plans, the central authority is expected to be largely accommodative this year, the year when the Communist Party will celebrate its 100th anniversary and is in need of a triumphant, festival and joyful atmosphere.
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The by-product of a government spending spree, of course, is waste and low inefficiency. But it is not a pressing concern for the Chinese government, after all, it has been embracing the model for decades, and it seems few will be scolded for being eager about development.
It would, therefore, be foolish for a local government to not aim high, even though their fiscal, debt and financial situations do not necessarily support such aims.
As such, China’s state-led growth model is set to intensify in 2021.
