President Xi Jinping has subtly toned down China’s focus on achieving its annual economic growth goals this year, seemingly indicating the difficulties faced by the world’s second-largest economy in achieving its “around 5 per cent” gross domestic product target.
“We should strive to fulfil the economic and social development goals and tasks for the whole year,” Xi told a symposium in the northwestern city of Lanzhou on Thursday, according to state broadcaster CCTV.
In contrast, Beijing’s top leadership said in the communique following July’s third plenum that China “must remain firmly committed” to accomplishing this year’s goals.
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Xi made the remarks on Thursday while urging governments and departments in the northwestern Gansu province to fully implement all the economic measures introduced by the central government, and seize the opportunities in the second half of the year.
“I think it’s an obvious change,” Ding Shuang, chief Greater China economist at Standard Chartered Bank, said on Friday.
“Before it was a resolute goal, meaning it was unwavering, and now to say ‘strive to do it’ emphasises the effort and not the outcome.
“We’re in the third quarter, and until now the data is not going to point to a rebound compared with the second quarter, and we’ve only got one quarter left this year.
“[GDP growth] is going to be slightly less than 5 per cent and that should be acceptable or a reality.”
Xi’s language is meant to “prepare the market for an outcome below 5 per cent” and by doing so head off any risk, added Ding.
After meeting its full-year growth target of “around 5 per cent” in 2023 after China’s economy expanded by 5.2 per cent, aided by a lower base in 2022, Beijing became more determined to achieve this year’s target of again “around 5 per cent”, using the term “an auspicious beginning” to describe the 5.3 per cent growth in the first quarter
However, with lower-than-expected growth figures in the second quarter, China’s consumption, investment and property sectors have continued to weaken.
Meanwhile, the export sector, which Beijing previously leveraged, is facing increasing trade friction despite exports rising by 8.7 per cent year on year in August.
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said China lacked sufficient policy tools to help meet its annual economic growth target.
Lovely said apart from sentiment among consumers, producers and the housing sector, local governments have also been slow to utilise their new ability to engage in bond-financed spending due to limited options for raising revenue.
“Further monetary easing will have little effect on spending if people feel that tomorrow’s economy will be worse than today’s economy,” she said.
“Many Chinese economists urge the government to take further action in the short term.”
The People’s Bank of China cut its seven-day reverse repo rate in July, while the issuance of local government special bonds surged by 67 per cent from the previous month in August, according to Yicai Global.
But the cooling of domestic and external growth engines is presenting greater challenges for Beijing, leading many financial institutions to lower their GDP forecasts.
UBS lowered its forecast for China’s real GDP growth in 2024 from 4.9 per cent to 4.6 per cent, while Nomura Securities has predicted 4.5 per cent growth this year. Bank of America, meanwhile, also cut its estimate from 5 per cent to 4.8 per cent.
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