China’s premier Li Keqiang flags weaker 6.5 per cent minimum growth target ahead of five year plan

Premier Li Keqiang highlighted a minimum growth estimate for China in the coming five years that could indicate the leadership’s readiness to accept the weakest period of expansion since the economy was opened up three decades ago.

The nation needs annual growth of at least 6.53 per cent in the next five years to meet the government’s goal of establishing a “moderately prosperous society”, Li said in an October 23 speech to Communist Party members, according to people familiar with the matter who asked not to be named as the remarks were not public.

 Communist Party leaders today conclude a four-day gathering to discuss their 2016-20 five-year plan for the nation, the first since President Xi Jinping and Premier Li took office.

READ MORE: Time for China to give hard economic growth targets a miss in five-year plan: analysts

“It seems that Premier Li is sending a signal through his speech that China’s government is likely to lower their growth target to 6.5 per cent in the 13th five-year plan,” said Le Xia, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria. “The 6.5 per cent target is still a little challenging. A target of 5 to 6 per cent seems a more feasible one.”

Private economists have predicted a lowering in the five-year growth target to 6.5 per cent, down from 7 per cent in the current plan, a reflection of the Communist leadership’s continuing attempts to move away from debt-fuelled expansion.

China’s central bank should not adopt quantitative easing to flood the economy with too much money, Li said, according to the sources. 

The comment underscores how the People’s Bank of China has opposed US and Japan-style direct purchases of assets in its campaign to ease liquidity and shore up the weakest expansion in a quarter century.

The State Council did not immediately respond to a faxed request for comment on Li’s remarks.