Wen Jiabao: China Will Lower Its Economic Growth Target

Chinese Premier Wen Jiabao said that the Chinese government hopes that economic growth will slow down to avoid inflation and adjust its economic structure. At that time, most developed countries are trying to accelerate the expansion of the economy.

In a market in Hefei, Anhui, China, customers are looking at price tags.

Huge investment in capital intensive industries, such as steel industry, has pformed China into a world factory, which has made an astonishing rise in China. Workers moving from poor rural areas to coastal cities have provided workers with factories.

But over the past thirty years, China's annual growth rate of over 9% has its high cost: serious pollution, rapid inequality and widespread corruption.

On Sunday (February 27th), Wen Jiabao's online dialogue with Chinese netizens revealed new economic growth targets.

He said, "we must not sacrifice the environment at the expense of rapid growth, which will result in overcapacity, pressure on the environment and resources, and unsustainable economic development.

Chinese economists have warned that the growth target of 7% should not be interpreted literally, but as a signal to the world and provincial officials that the Chinese government is serious about changing the driving force of economic growth and shifting its focus to domestic consumption.

The "11th Five-Year" plan announced in 2006 set the target of economic growth at 7.5%, but the actual growth rate was 11.1% between 2006 and 2010.

The last time the Chinese government set the target of economic growth in 7% or 2001, when China just recovered from the Asian financial crisis, GDP grew by 7.5%.

But according to Morgan J.P. data, between 2001 and 2005, the average growth rate of China's GDP was 9.8%. In 2001,

Morgan, a Chinese analyst at Morgan Stanley, said that the goals set by the government in the five year plan often do not accurately predict the growth of the next five years.

But it also means that we will see a slowdown in economic growth.

He predicted that the average annual growth rate will be 9% in the next five years, and the growth rate will be less than 8% in the next five years.

Others are less optimistic.

Kenneth Rogoff, an economist at Harvard University, warned that the Chinese economy could fall heavily, especially if China was tied up by the banking crisis. Rogoff,

A group of economists at home and abroad believe that the past growth rate is unsustainable because China's population is gradually increasing.

This leads to a strange phenomenon: countries outside China are trying to accelerate growth and expect to recover from the global financial crisis, while China is trying to brake.

Eswar Prasad, an economist at the Brookings Institution, said that China's leaders did not exclude economic growth, but realized that they did not get quality growth, and ordinary families did not get the benefit of commensurate with economic growth. Prasad,

Wen Jiabao is China's leader in economic affairs. He exchanges with netizens online before the annual National People's Congress.

This year's National People's Congress will open in March 5th, and will be officially released in 12th Five-Year.

Every year, Wen Jiabao will also put forward an independent, symbolic 8% annual economic growth target in the government work report delivered at the opening ceremony of the National People's Congress.

It is not clear whether this growth rate will be lowered in Wen Jiabao's speech this year.

The US and other G20 members have been urging China to adjust its economic growth model to reduce its dependence on export growth, at least since 2004. Wen Jiabao has been making this a goal.

However, China has not made progress on this issue.

The proportion of consumption in the economy is far below the proportion of other major economies.

By relying more on investment to achieve growth, the Chinese government has benefited most of the growth of the economy to large state-owned enterprises instead of families, which has led to public dissatisfaction.

Wen Jiabao called for the growth model to tilt towards consumption, which is a challenge for state-owned enterprises. China's state-owned enterprises have swallowed up a growing proportion of Chinese wealth, bringing benefits to corporate executives and political backers within the Communist Party.

This month, state media reported that Liu Zhijun, the powerful Railway minister, was dismissed.

The former minister was responsible for supervising billions of dollars invested in state-owned high-speed rail network construction enterprises.

{page_break}

The provincial and provincial leaders responsible for implementing economic planning also lack the motivation to reduce investment, because their assessment is mainly based on their ability to achieve rapid growth.

New projects may also become the source of their bribes to developers and others.

The central government plans to adopt a new assessment standard for local governments and will pay more attention to efficiency, environmental protection and people's living standards, according to a report on Xinhua's "Premier Wen Jiabao's questions and answers."

Xinhua did not report in detail.

Prasad, an economist at the Brookings Institution, said that without exception to the expansion of domestic demand, economic growth will slow down.

However, with the further development of labor-intensive service industry, even if the growth rate slows down, it is expected to create more jobs.

From 2000 to 2009, despite the rapid growth of GDP in China, the annual growth rate of employment was only 0.9%.

Wen Jiabao also made it clear that China does not intend to achieve the goal of economic growth through a drastically adjusted exchange rate, as the G20 member states have been urging.

Since mid June 2010, when China announced that it allowed the renminbi to float to a certain level, the yuan has appreciated 3.7% against the US dollar, averaging less than 0.5% a month.

Generally speaking, currency appreciation can make imports cheaper and raise the standard of living of residents.

Appreciation of the currency may also be a tool for curbing inflation.

According to Xinhua, Wen Jiabao reiterated that the appreciation of the renminbi must be carried out in a prudent and gradual manner.

He said that if the renminbi appreciates substantially, it will cause many processing enterprises to go bankrupt or unable to operate, which will cause foreign trade enterprises to shift their orders to other countries, and many of us will lose their jobs, and these workers are mainly migrant workers.

Wen Jiabao also tried to describe in detail the measures that will be taken to curb the rise in housing prices.

Some economists believe that rising housing prices are dangerous.

The report quoted Wen Jiabao as saying that housing prices should be kept at a reasonable level by controlling the excessive upward trend of housing prices.

He said that the government plans to build 36 million new affordable housing by 2015, and adopt economic and legal means and necessary administrative measures to curb speculation.

Wen Jiabao talked about China's efforts to curb inflation and speculation in the property market by using monetary policy, but in Xinhua's report, Wen Jiabao did not mention exchange rate policy.

Earlier this month, China raised the benchmark one-year lending rate by 0.25 percentage points to 6.06%, the third increase in four months.

More tightening measures are expected.

However, China usually relies on other tools to curb inflation, including industrial policies.

For example, in order to curb the rise in food prices, China has been raising grain purchasing prices, increasing rural water conservancy projects, and putting in government reserves of grain, oil and sugar.

The government is cautious about relying on the exchange rate to curb inflation, partly because the rate hike will increase the difficulty for China to avoid further appreciation of the renminbi.