China Cuts Growth Target, Changes Objectives

March 6th, 2012
in econ_news

Econintersect:  Premier Wen Jiabao (pictured) has called for a change in the country’s economic goals to higher quality development, more sustainable wen-jiabaogrowth and a more efficient economic model.  Wen delivered remarks to the National People’s Congress in Beijing Monday (March 5).  The target for growth has been reduced to 7.5%. It had been 8 % for the past six years.  The target for inflation remained unchanged at 4.0%.  After hitting a three-year high of 6.5% in July 2011, the official inflation rate has been reported in the 4.1-4.5% range the past two months.

Follow up:

China experienced a slight decline in exports for the year 2011 over a year earlier, and the current account surplus which has been several hundred billion a year recently is expected to be much smaller in 2012, perhaps as low as $50 billion.

As the balance of trade surplus declines, China will be looking for ways to stimulate domestic consumption.  This means increasing wages and income.  From Bloomberg:

“The biggest hurdle facing China’s economy now is that the government’s income is too high and the people’s income is too low,” Zong, 66, chairman of Hangzhou Wahaha Group Co. and a member of China’s legislature, said in the interview.

The very low contribution of consumption to GDP in China has been highlighted at GEI Analysis by Michael Pettis as a problem the country needs to address.

Below are the target numbers compared to 2011 actuals, from Shanghai Daily:


John Lounsbury


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