China Sees 7% as Bottom-Line Growth Tolerable in Slowdown
Premier Li Keqiang’s government sees 7 percent growth as the bottom line for tolerance of an economic slowdown, Chinese news organizations reported, signaling the nation will act to support expansion if needed.
Expansion below 7 percent won’t be tolerated because China needs to achieve a moderately prosperous society by 2020, according to a commentary published July 21 by the official Xinhua News Agency and credited to reporter Wang Yuewei. Li said at a recent meeting with economists that 7 percent is the “bottom line” and the nation can’t allow growth below that, the Beijing News reported today.
Chinese stocks headed for their biggest gain since July 11 amid optimism that the government won’t let expansion slow too much after gross domestic product rose 7.5 percent in the second quarter from a year earlier, the same pace as China’s official target for this year. Li previously said the government shouldn’t let growth and employment fall below lower limits that he didn’t specify.
“The comments confirmed that the government’s acceptable range for growth this year is between 7 percent and 7.5 percent,” said Chang Jian, a Hong Kong-based economist at Barclays Plc who formerly worked for the World Bank. “As economic growth is slowing to below 7.5 percent, the government policy’s focus is gradually shifting to stabilizing growth.”
The Shanghai Composite Index (SHCOMP) rose 1.7 percent at 2:02 p.m. local time.
Lower Limit
Other parts of the reports may add to confusion on the government’s tolerance for a slowdown. The Xinhua commentary said 7.5 percent is the “lower limit” for growth this year while the Beijing News reported Li said the “lower limit” for China’s GDP expansion is 7.5 percent. The articles didn’t elaborate on the difference between a “lower limit” and a “bottom line.”
Finance Minister Lou Jiwei said in a press briefing in Washington on July 11 that growth as low as 6.5 percent may be tolerable in the future. While the government in March set a 2013 growth goal of 7.5 percent, Lou said he’s confident 7 percent can be achieved this year.
Xinhua later amended its English-language report on Lou to say there’s no doubt that China can achieve this year’s growth target of 7.5 percent.
Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said 7.5 percent is the lower limit for growth this year and 7 percent is the boundary starting next year. The government is already trying to support expansion in 2013 with spending on railways, city infrastructure and environmental protection, Shen said.
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By Bloomberg News - Jul 23, 2013 1:10 PM GMT+0700
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