Will the rest of China follow Shanghai's lead to ditch GDP targets?
Shanghai's move to drop them sparks debate
Debate is rising about whether China should scrap annual gross domestic product goals following Shanghai mayor Yang Xiong's announcement that the city had ditched its official target for this year, making it the first provincial-level administration to abandon what is regarded as a Stalinist hangover.
The move has prompted speculation about whether other regional governments - or even the central government - will follow suit, or whether it would have an impact on Premier Li's Keqiang's work report.
Until recently, all officials - from county chiefs and municipal administrators to national leaders - knew that presiding over fast economic growth was the surest path to promotion and a successful career.
Even under the quasi-market, quasi-planned economy, GDP growth targets have become inviolable performance measures rather than serving as forecasts of activity for planning and budgetary purposes as they are in other developed economies.
Mainland officials have long been convinced that failing to achieve economic growth targets leads to soaring unemployment and social instability.
Yet, in recent years, the leadership has moved to favouring quality growth, rather than speed, after the cut-throat economic expansion of the past three decades led to overcapacity, worsening pollution, a deteriorating economic structure and widening wealth gap between people and regions.
But, such a change will be easier said than done as long as leaders remain keen about GDP. For instance, when growth slowed sharply in the middle of last year, officials ramped up spending on infrastructure in the hope of achieving the 7.5 per cent annualised growth target set last March. The world's second-largest economy eventually grew at 7.4 per cent last year, but this was still a 24-year low.
Most analysts agree that it is too soon to expect China as a whole to stop focusing on GDP targets. It will remain an important policy tool for guiding and evaluating officials, especially in poorer parts of the country where faster growth is needed to narrow the gap with coastal cities.
Louis Kuijs, chief economist for greater China at Royal Bank of Scotland, said the decision by Shanghai was another step in the evolution of the mindset among lawmakers about the role of growth and growth targets in forming economic policy.
But he said he did not think it would change this year's plan of what the nationwide growth target would be.
"I still expect the national government to set a target of 7 per cent for GDP growth - down from 7.5 per cent in 2014," Kuijs said.
Analysts said that the best-case scenario following Shanghai's action would be to demote GDP growth from an official target to a budget and planning tool - something that is done in most free-market economies.
Last year, some local governments used the word of "around" to qualify the growth forecast to show that they were not hard targets set in stone.
Tim Condon, chief economist at ING Asia, said the government would make targets much more flexible, such as using a range of between 6 per cent and 7 per cent, or 5 per cent and 7 per cent.
"Any range would have to include last year's target as the upper bound to avoid sending the wrong signal: that growth is slowing too quickly," Condon said.
Most economists have welcomed Shanghai's step, saying that with no growth target to cling to, or embarrass them when it was missed, local officials had more time for other priorities.
They said there were still some other targets, such as urban job creation, that were still set on an annual basis.
Condon expected changes would be considered for other targets such as pollution, job creation, education and research and development.
