China is expected to retain the use of annual GDP growth targets next year and set it at around 6.5%, according to a new report from Goldman Sachs.
Market observers have increasingly speculated that Beijing will reduce or even completely abandon its GDP growth targets, in order to mitigate their distortionary impact upon economic development as China places greater emphasis upon “quality” growth.
This speculation further intensified when President Xi Jinping refrained from setting a long-term economic growth target at the Chinese Communist Party’s bi-decennial National Congress in October.
Goldman Sachs expects China to retain the use of growth targets next year, however, because they are “still an important anchor for economic policymakers, ministers and provincial officials.”
“The importance of the policy target cannot be understated,” said a Goldman Sachs report led by chief Asia economist Andrew Tilton.
“They represent both a message to the bureaucracy and public commitment…[providing] meaningful information about the policy reaction function over the coming year.”
According to the report the most likely outcome for 2018 is that Beijing will set its GDP target at “around 6.5%,” given that anything less would have “a notably more hawkish implication.”
Setting the 2018 growth target at this level would reiterate Beijing’s emphasis upon quality growth, “while still being consistent with goals from the previous Congresses to double income over this decade.”
At the start of the decade the Chinese government set the target of doubling 2010 GDP and per capita income levels by 2020, with Xi observing in 2015 that this would require average annual growth of over 6.5% throughout the full decade.