China central bank: Don’t worry about growth – we’ll clear five per cent
China is anticipated to achieve its annual gross domestic product (GDP) growth target this year, with a focus on transitioning to a high-quality and sustainable expansion model, according to People’s Bank of China Governor Pan Gongsheng, as stated in a speech posted on the central bank’s website.
Beijing had set a growth target of around 5 per cent for the current year.
However, some economists have expressed concerns that the government’s growth objective might be challenging to meet, given that the incremental policy stimulus from Beijing might not suffice to stabilize the economy.
Pan said, “Our country’s economy needs a reasonable growth rate, but more importantly, we need to achieve high-quality and sustainable development. Transforming the economic growth mode is more important than pursuing a high growth rate.”
The central bank intends to maintain reasonable credit growth, ensure adequate liquidity, and optimize the utilization of financial resources that have been underutilized, without providing specific details, Pen added.
But some economists predict that China’s economy will grow at less than 5 per cent in both the current year and the following year, as the property market, once a cornerstone of the world’s growth, faces challenges.
Citigroup projects a 4.3% growth rate for 2023, while Barclays and ING anticipate a slightly higher 4.5%. Berenberg and Morgan Stanley are even more bullish, forecasting a robust 4.7% growth for the same period.
“5% is a low hurdle, and reaching it doesn’t mean that all of China’s growth worries are over,” said Robert Carnell, regional head of research, Asia-Pacific at ING.
The world’s second-largest economy has encountered difficulties following a brief post-COVID recovery, primarily due to substantial debt resulting from decades of infrastructure investment and a decline in the property market. These challenges not only pose risks to China but also to the global economy.
With a significant portion of household wealth tied to the struggling property market, along with rising youth unemployment, weak consumer demand, and the reluctance of financially strained private enterprises to invest, policymakers are confronted with a formidable task in revitalizing economic growth.
IMF projections on Chinese growth have fluctuated. A poorer performance than expected would take the bounce out of any global post-Covid rebound.