Exclusive: China to
target around 6.5 percent growth in 2017 - sources
Send a link to a friend
[January 16, 2017]
By Kevin Yao
BEIJING
(Reuters) - China will lower its 2017 economic growth target to around
6.5 percent from last year's 6.5-7 percent, policy sources said,
reinforcing a policy shift from supporting growth to pushing reforms to
contain debt and housing risks.
The proposed target was endorsed by top leaders at the closed-door
Central Economic Work Conference in mid-December, according to four
sources with knowledge of the meeting outcome.
"The target will be around 6.5 percent, which indicates that slightly
slower growth is acceptable," said one of the sources, a policy adviser.
The State Council Information Office, the public relations arm of the
government, declined to comment.
The world's second-largest economy likely grew around 6.7 percent last
year - roughly in the middle of the government's target range - but it
faces increasing uncertainties in 2017, the head of China's state
planning agency said on Jan. 10.
Policy stimulus measures - evident in record lending from mostly
state-owned banks and increased government spending - have fueled
worries among top leaders about high debt levels and an overheating
housing market that could threaten financial stability if not addressed,
the sources said.
Under the central bank's recently announced "prudent and neutral"
stance, it is expected to guide market interest rates higher to help put
the brakes on flush credit conditions, which should also support the
weakening yuan <CNY=CFXS>, the sources said.
"They've put more emphasis on controlling risks, and monetary policy
could be a bit tighter," said a second policy source, though he
characterized the change as 'fine-tuning' ahead of a key party meeting
in the autumn at which there will be a change in the top leadership.
"They are keen to keep economic growth stable before the 19th party
congress," the source said.
Top leaders have pledged to stem the growth of asset bubbles in 2017 and
place greater importance on the prevention of financial risk, while
keeping the economy on a path of stable and healthy growth.
China's banks doled out a record 12.56 trillion yuan ($1.82 trillion) of
loans in 2016 as the government encouraged more credit-fueled stimulus
to meet its economic growth target, despite worries about the risks of
an explosive jump in debt.
REFORM VS GROWTH
The economy needs to grow at least 6.5 percent between 2016 and 2020 to
meet Beijing's goals of doubling GDP and per capita income by 2020 from
2010 levels.
[to top of second column] |
Workers build scaffolding at a construction site on a hazy day in
Beijing, China, December 31, 2016. To match Exclusive CHINA-GROWTH/
REUTERS/Thomas Peter/File Photo
But
they have also pledged "decisive results" by 2020 on a wide range of reforms to
let market forces play a bigger role in driving the economy away from
inefficient state-owned enterprises, which in the short term could slow output.
Last year's expected growth of 6.7 percent, though the slowest in 26 years, will
have given the government a little more room to maneuver, but Beijing will not
tolerate a sharp slowdown ahead of the leadership transition, the policy sources
said.
The 2017 growth target will be announced at the annual meeting of the National
People's Congress, the country's parliament, in early March.
The sources said government was set to maintain a 3 percent inflation target
this year, suggesting policymakers are less worried about a sharp surge in
consumer prices, despite surging factory-gate costs in recent months.
December consumer prices rose 2.1 percent from a year earlier, easing from a 2.3
percent rise in November, while producer prices jumped 5.5 percent in December
year-on-year, the most since September 2011.
China's producer price jump, fueled by rising commodity prices, has yet to
filter into consumer prices due to weak demand, so the central bank is not yet
under big pressure to tighten policy.
Even if inflation hits 3 percent in some months this year, the central bank
would have to assess whether the economy is on a solid footing before raising
interest rates, which may help the struggling yuan, the policy sources said.
"If you don't want the exchange rate to depreciate, you should tighten credit,
but there could be problems in debt prices and market liquidity – how to balance
them is a very difficult thing," one of the sources said.
(Reporting by Kevin Yao; Editing by Will Waterman)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |