Replace China’s GDP Growth Targets with Employment Stability: Ex-PBOC Research Chief


The former chief economist of the People’s Bank of China’s research department has called for Beijing to replace its long-standing GDP targets with employment rate goals.

Ma Jun (马骏), current chair of Tsinghua University’s Finance and Development Research Centre, said that the Chinese economy has reached an opportune moment for rescinding the use of GDP growth as the primary basis for economic performance targets.

In a recent interview with Caixin, Ma called for the cancellation of GDP targets starting in 2018, and their replacement with stable employment as the core goal for macroeconomic policy in future.

According to Ma ongoing changes in the Chinese economy will necessitate a greater focus on employment as a performance benchmark, given that the relationship between GDP growth and employment is weakening as the country’s working age population declines, its labour-intensive services sector acquires a more prominent role, and growth in labour productivity eases.

“The analytical results of the multiple economic models we’ve used indicates that because of changes in the population and economic structure, even if GDP growth gradually declines to around 6% or even lower over the next several years, China’s employment rate will remain fundamentally stable,” said Ma.

“For this reason, there is no need to continue to maintain 6.5% as a baseline for economic growth.”

Ma further points out that an overt preoccupation with GDP growth targets is exacerbating the rapidly expanding debt burden that China has amassed in the wake of the Great Financial Crisis.

“Under circumstances where China’s macro-leverage rates are already high and financial risk cannot be overlooked, continuing to set annual GDP growth targets will lift the impetus for governments and state-owned enterprises at all levels to increase leverage, expanding financial risk and real estate bubbles, heightening environmental and resource pressures, and raising the incentive to falsify data,” said Ma.

“Changing the macro-control target from GDP to employment should be become a key part of establishing a modern, macro-economic regulatory system.”

Ma joins a growing chorus of influential opinion calling for the scrapping of China’s GDP targets, due to its distortionary impact upon economic growth.

In its latest assessment of the Chinese economy IMF called for Beijing to scrap its GDP targets, on the grounds that it was exacerbating the country’s debt woes by compelling local governments to engage in reckless credit expansion to spur growth.

China’s domestic media has also given heavy play to the need shift from high speed to “high quality” economic growth ever since the Chinese Communist Party’s 19th National Congress, with the matter expected to serve as the chief theme of Beijing’s annual Central Economic Work Conference.