President Xi Jinping said yesterday that China needs to achieve economic growth of at least 6.5 percent in the coming years to become “moderately prosperous”, while the Communist Party announced plans to allow the yuan to trade freely by 2020.
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The rise of China and its expanding investment fields bring new opportunities for other countries’ economic development, said Irina Kokushkina, associate professor at the World Economy Department of Russia’s St. Petersburg State University.
The comments are the clearest indication yet that Beijing will reduce its target growth rate from the current “around 7 per cent”, after expansion slowed last quarter to its lowest in six years.
The announcement Tuesday came as the party released more details of decisions at a meeting last week on its latest five-year development plan.
Meanwhile China’s manufacturing sector has declined unexpectedly for the third month in a row. “Not one five-year plan has unfolded as planned. Why?” Even the worldwide Monetary Fund, which tends to be more optimistic than private economists, projects growth of 6.3% next year.
“China aims to narrow the income gap and raise the proportion of the middle-class income population in the next five years”, according to a report by Xinhua, the state news agency, on the proposals for the next five-year plan, which will be the 13th in the party’s history.
In the nine months of this year, South Korea shipped US$102.1 billion worth of goods to China, accounting for 25.7 percent of all outbound shipments.
The Chinese government has ramped up efforts this year to support the slowing economy and falling stock market.
“In a market economy, you don’t set GDP growth targets”, said Derek Scissors, an Asia economist and resident scholar at the American Enterprise Institute in Washington.
“The biggest challenge facing our country is the middle-income trap”, Xu Shaoshi, head of China’s top planning body, the National Development and Reform Commission, told reporters Tuesday.
China wants to promote the unit as a global reserve currency alongside the dollar, an ambition that depends on its willingness and ability to loosen tight restrictions on its trade.
China will seek to increase the yuan’s convertibility in an orderly manner by 2020 and change the way it manages currency policy, according to the Communist Party’s plan.
As long as the government met these conditions for the majority of the population, numerous problems, inefficiencies and inequities in China’s governance could be – and largely were – overlooked by its populace with the assumption that they would eventually be corrected.
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China also said it would lower the leverage ratio in its financial system, where a build-up of debt after the government’s stimulus measures during the global financial crisis triggered concerns over the health of the world’s No. 2 economy.
