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 China looks set to miss its growth target this year for the first
time since 1999, and full-year growth is likely to be the weakest in
24 years. The government last cut its annual growth target in 2012,
to 7.5 percent from eight percent that it had kept for eight years.
Sources said government-run think-tanks, which are influential in
the decision-making process but do not wield power themselves, are
planning to recommend Beijing reduce its official GDP growth target
in 2015 to seven percent, down from 7.5 percent this year.
"President Xi (Jinping) has already hinted at the growth target when
he said growth of seven percent is the highest in the world," said a
senior economist at the Chinese Academy of Social Sciences (CASS),
who declined to be identified.
"I think it should be seven percent if there are no more surprises.
But it cannot be lower than seven percent, otherwise there could be
employment problems and debt default problems."
China's reform-minded leaders have shown greater tolerance for
slower growth, but they will have to tread carefully to avoid a
sharper slowdown that could fuel job losses and debt default risks,
analysts say.
The annual Central Economic Work Conference, which state radio said
meets from Tuesday, may reiterate a prudent monetary policy, but the
sources believe the underlying tone could be accommodative to ward
off a sharp growth slowdown.
Economists expect policymakers to embark on their biggest easing
campaign since the global financial crisis, forecasting a
combination of more rate cuts and reductions in bank reserve
requirements to encourage lending despite mounting bad loans.
After months of saying major stimulus wasn't needed, the central
bank surprised markets on Nov. 21 by cutting interest rates for the
first time in more than two years to shore up growth and lift some
of the pressure off debt-laden companies.
INFLATION SEEN EASING TOO
Several think-tanks have also suggested the government lower its
target on consumer inflation to around three percent from this
year's 3.5 percent, given falling commodity prices.
"We recommended a growth target of around seven percent," said Zhu
Baoliang, chief economist at the State Information Centre, a top
government think-tank.
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"We suggested an inflation target of around three percent. On
employment, we should aim for 10 million new jobs," he said, adding
that he recommended a quicker pace of reform in 2015.
The government may budget a deficit of nearly three percent of GDP
in 2015 from this year's 2.1 percent, to allow local governments to
sell bonds independently as they scale back fund-raising via local
financial vehicles, sources said.
"We will close the back door, barring local governments from raising
debt via special purpose vehicles, but we must open up the front
door. We need to boost fiscal spending and expand the budget deficit
as we need to stabilize growth," said the CASS economist.
The meeting, which sources said would run until Thursday, is
unlikely to result in any public announcement of economic targets,
which are usually reserved for the opening of the national
parliamentary session in early March.
Adding to already gloomy data, analysts expect upcoming figures on
investment and inflation to be similarly lackluster, and the
property market is likely to remain weak well into 2015, weighing on
demand for everything from furniture and glass to cement and steel.
Reducing the growth target would be a natural reaction as Beijing
moves to manage domestic expectations.
Top leaders could discuss ways to quicken economic reforms next
year, including a fiscal overhaul to deal with the root cause of
local government debt, and further financial market liberalization,
the sources said.
(Writing by Pete Sweeney in SHANGHAI; Editing by Mike Collett-White)
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