Econintersect: Premier Wen Jiabao (pictured) has called for a change in the country’s economic goals to higher quality development, more sustainable growth 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.
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 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:
- Wen trims China’s growth target (Wang Yanlin, Shanghai Daily, 6 March 2012)
- China Cuts Growth Target to 7.5% as Wen Seeks Sustainable Growth: Economy (Bloomberg, 5 March 2012)
- China: Imports Drop(GEI News, 10 February 2012)
- China: Inflation Jump in January may be Temporary (GEI News, 9 February 2012)
- Interest Rates, Consumption and Savings Rates (Michael Pettis, GEI Analysis, 17 October 2011)