BEIJING May 14 China might miss its economic
growth target for the first time in 15 years as data points to a
sharper-than-expected loss of momentum and top leaders are
talking about a "new normal" of slower growth.
The government has already given itself some room on its
growth target, refining it to about 7.5 percent and saying a
couple of percentage points either side of that was acceptable.
But after annual economic growth slowed to an 18-month low
of 7.4 percent in the first quarter, data for April has raised
the possibility it could slow further.
"We maintain our view that GDP growth is on a downtrend and
continue to expect it to slow to 7.1 percent in the second
quarter," Zhang Zhiwei, an economist at Nomura, said in a
Financial markets hardly seem concerned. The expectation is
that despite the rhetoric of accepting slower growth,
authorities will step in to safeguard the target with some sort
of stimulus measures, as they did in 2013. A cut in the official
target, which would require parliamentary approval, would be
"To stop growth from sliding out of a "reasonable range",
Beijing needs to ease policy a little more in the coming months,
if not weeks," HSBC economists said in a report, forecasting
more supportive monetary and fiscal policy.
"Policymakers have ample ammunition on both fronts though,
and we think they are likely to deploy these in a more active
manner in the coming months if not weeks to prevent a further
deterioration in the real economy."
If the economy just meets its target for 2014, it will still
be the slowest growth since 1990. If it comes in below that, it
will be the first time the target has not been met since 1999,
when the economy grew 7.6 percent compared with a goal of 8.0
China's leaders have been at the forefront of lowering
expectations, talking of the need to accept slower but more
sustainable growth as they try to remake the economy to be
driven more by consumption rather than the traditional engines
of exports and investment.
"We must adapt ourselves to a new normal of economic
growth," President Xi Jinping said at the weekend.
To that end, authorities have ruled out major stimulus to
accelerate growth. However, they are expected to put a floor
under activity and head off any surge in unemployment that could
be seen as a threat to social stability.
Premier Li Keqiang has said the economy has to grow by
around 7.2 percent each year to create enough jobs.
Another potential concern is the uneven growth patterns in
the country as the reforms are pushed through, with data showing
growth slowing markedly in some provinces.
People's Bank of China (PBOC) Governor Zhou Xiaochuan said
at the weekend the central bank would only fine-tune its policy
to counter economic cycles and would not be taking any
large-scale steps to boost activity.
This week, the central bank told banks to improve the
efficiency of mortgage lending, as a flagging property market
becomes a major risk factor.
Some Chinese cities are relaxing property controls after
near five years of national government efforts to restrain house
On the fiscal side, measures have been targeted, such as tax
cut for small firms and faster construction of railway lines.
"For the time being, China will continue to walk a fine line
between growth slipping further due to negative sentiments or
financial risk versus accelerating from stimulus," IHS China
economist Brian Jackson said.
(Reporting by Aileen Wang, Shao Xiaoyi, and Kevin Yao; Editing
by John Mair)