The Chinese government is aiming for economic growth of 7.5% in 2012, according to Premier Wen Jiabao, lower than the 2011 goal of about 8%. (File photo/Xinhua)
In his government work report for 2012 delivered on March 5, the Chinese premier, Wen Jiabao, set the goal for the country's GDP growth this year at 7.5%, the first time Beijing has eschewed a growth target of over 8%. The report highlights an adjustment in China's economic growth model and a determination to fight inflation.
The country's economic growth rate slackened quarter by quarter last year, from 9.7% in the first quarter to 8.9% in the fourth quarter. The trend looks set to continue into this year. Correspondingly, the consumer price index (CPI), a main gauge of inflation, dropped from 6.5% in the middle of 2011 to 4.1% at the end of the year.
Along with a 7.5% GDP growth target, the government hopes to keep inflation to below 4% this year, similar to last year's level, though this year there is a better chance of achieving that goal. Local economists point out that slowdown of economic growth to a reasonable range is conducive to price stability, thereby creating favorable conditions for economic transformation.
Chang Ping of the National Development and Reform Commission, the country's main economic planner, reports that cutting the GDP growth target conforms to the government's 12th five-year economic development plan (2011-2015), which sets the overall growth target for the five-year period at 7%.
Some local experts note that lowering the growth target signals an intent to accelerate the country's economic transformation, aiming to achieve a "soft landing," or control of inflation and maintaining a steady deceleration of economic growth at the same time.
In 2011, China's GDP still grew 9.2% for the whole year, still well above the growth target of 8% and three times the 3% growth seen by the global economy.
Lowering the economic growth target to less than 8% is still a significant move. First, the double-digit growth seen in China over the past 20 years is unlikely to continue in years ahead. Lowering the growth target increases the credibility of the target. Second, with the growth target for the 12th five-year plan having been cut to 7%, a gradual reduction of the annual growth target represents an orderly deceleration of the pace of growth.
Third and significantly, 2012 is the year of a transition of power at both the central and local government levels. The cut in growth target can prevent the blind expansion of investment by the incoming governments.
Mostly importantly, the lowering of the growth target reflects that Beijing is switching its focus to the quality, rather than speed, of the country's economic growth. For years, the Chinese economy has depended on domestic investment and external development to sustain its high economic growth. This model cannot continue, as it has fostered asset bubbles, brought about uneven wealth distribution, wrought devastation on the environment and created conflicts in society. The lowering of the growth target will break the single-minded pursuit of economic growth, reserving more resources and leeway for the pursuit of other social and economic reforms.