High-quality development outweighs GDP target, experts say

It may be a better option for China to pay less attention to its GDP growth target this year or even set no growth target for a second consecutive year as it focuses on a high-quality development agenda, economists said on Wednesday.

A road is built on top of a bridge and follows the curve of river valley in Xingshan county, Central China's Hubei province. [Photo/Xinhua]

One of the hottest topics surrounding key annual meetings set for March called the two sessions is whether Beijing will retain its headline GDP growth target, they said. The question may signal key changes in economic policymaking as China embarks on the 14th Five-Year Plan (2021-25) period, the economists added.

"The two sessions, the annual gatherings of the country's top legislature and political advisory body, would demonstrate to the public that China focuses on high-quality growth and not just chasing after a numerical target," said Iris Pang, chief China economist at Dutch bank ING.

Instead of announcing a specific number for a GDP growth target, the two sessions could focus on a high-quality development agenda such as realizing technology self-sufficiency, strengthening environmental protection and achieving carbon neutrality by 2060, Pang said.

The country has decided to firmly implement the new development philosophy in the 14th Five-Year Plan period to achieve higher-quality development that is more efficient, equitable, sustainable and secure, according to the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China, held in October.

For the first time in years, last year's two sessions set no GDP growth target due to the huge uncertainty engendered by COVID-19 and the global economic and trade environment.

Policymakers instead prioritized ensuring stability on "six fronts" and security in "six areas", such as employment, people's basic living conditions and the development of market entities.

Given the country's emphasis on high-quality development, China could consider continuing the practice this year and focusing on employment targets, said En Xuehai, China International Fund Management's group chief investment officer of asset allocation and retirement fund investment.

This year's new urban employment target may increase by 1 million compared with 2020, reaching 10 million, according to En.

"Paying less attention to the GDP target doesn't mean the government does not pay attention to economic growth, but under the new situation, the quality of growth is becoming more important than the quantity," En said.

Kang Yong, chief economist at KPMG China, said another factor that has made it reasonable for China not to set a GDP growth target for this year would be the lingering COVID-19-induced disruption of economic growth.

Mainly thanks to last year's extremely low comparison base due to the pandemic, China's economy is expected to grow by about 8.8 percent year-on-year this year, Kang said. GDP growth was 2.3 percent for 2020 and 6 percent for 2019.

"This base-effect-driven high growth rate would not reflect the real condition of China's economy. The government therefore can consider not setting a growth target this year that could distort normal economic policymaking," Kang said.

Moreover, global uncertainties in pandemic control and economic recovery linger, reducing the necessity for China to set a GDP growth target as well, Kang added.

A central bank expert recently said it is advisable for China to not use GDP growth targets as a way to evaluate local governments' performance, thereby avoiding officials from setting high targets and piling up debt.

China should instead use employment stability and inflation control as the main targets of macro policy, which is a common practice in many market economies, Ma Jun, a member of the People's Bank of China's monetary policy committee, said at a seminar in January.

But other experts said abandoning the GDP target this year is not appropriate as it is hard to find alternative indicators to guide policymaking, especially given the lack of comprehensive statistics for employment.

Most provincial regions in China have disclosed their expectation targets of gross regional output growth for 2021, with the figures being at least 6 percent year-on-year, according to media reports.

While it remains to be seen whether the country will forgo the GDP growth target this year, experts said China's economic recovery is well on track, on the back of rallying consumption, recovering investment in the manufacturing sector, and resilient export growth.

Cheng Shi, chief economist at ICBC International, said the earlier containment of COVID-19 will help China maintain its edge in exports for some while, contributing to the country's economic rebound this year. The International Monetary Fund has projected China's GDP growth to hit 8.1 percent this year.

The latest figures from the European Union's statistical office have pointed to the resilience of China's exports, as the EU's exports and imports from China both increased last year despite the pandemic.

China became the EU's main trade partner in 2020, with the bloc's imports from China up by 5.6 percent year-on-year to 383.5 billion euros ($462.5 billion) while exports are up by 2.2 percent to 202.5 billion euros, Eurostat said on Monday.