BEIJING Dec 7 China's leaders are likely to
stick with the 2012 economic growth target of 7.5 percent when
they chart a course for 2013, allowing higher levels of
fixed-asset investment to offset weak export demand, sources
involved in internal discussions about the plans say.
The leaders are expected to gather in mid-December for the
annual Central Economic Work Conference, which investors watch
closely for clues on policy priorities for the year ahead.
Steering a steady course for the economy may disappoint some
in financial markets because of expectations China's new leader
Xi Jinping and other policymakers would unveil aggressive
stimulus next year when they take office to revive an economy
seen growing in 2012 at its weakest pace since 1999.
China's annual growth rate fell for seven straight quarters
through the third quarter, but economists are forecasting the
start of a pick up in October-December and for full-year
expansion to top the government target. However, with the euro
area in recession and U.S. demand sluggish, the economy faces
considerable headwinds in 2013.
"The 7.5 percent economic growth target is achievable, but
it cannot be achieved without any difficulties," said a source
at a top think-tank.
Beijing had maintained a target for economic growth of 8
percent for eight years before cutting it in 2012 to 7.5
Policymakers believe keeping the 7.5 percent target in 2013
will help balance the need to keep growth humming with the need
for economic wiggle room to deepen reforms, said government
economists involved in the discussions about the plans.
The government also intends to maintain a 4 percent
inflation target and 14 percent limit on M2 money supply, the
sources said. They declined to be identified because of the
sensitivity of the issue.
The target for fixed-asset investment, or spending in such
areas as infrastructure, roads, bridges, and housing, could be
raised to around 20 percent from 16 percent in 2012, they said.
A higher target is unlikely to surprise financial markets
however, since investment in January-October 2012 was running
well ahead of target at more than 20 percent from a year earlier
and policymakers earlier this year said they would fast-track
investment approvals to underpin growth.
"I am not overly concerned about over investment as long as
it is channelled to sectors in need while steering away from
resource intensive and inefficient industries," said Connie Tse,
an economist at Forecast Pte in Singapore.
A higher pace of investment could also help offset weakness
in export demand, which the Organisation for Economic
Co-operation and Development highlighted as a major weak spot
for the next few years.
The sources said top leaders would also maintain a "prudent"
monetary policy in 2013, the catch word since late 2010 that has
encapsulated at first modest tightening and then modest
loosening following the global financial crisis.
Equally, the new regime will keep to a pro-active fiscal
policy, giving room to increase state outlays on infrastructure
investment if needed.
Setting a 4 percent inflation ceiling reflects the official
view that price pressures could rise from the current rate of
1.7 percent due to the impact of loose monetary policy in the
West, especially in the wake of U.S. measures of pump cash into
its economy, the sources said.
The exact date of the economic conference is not known.
Chinese state-news agency Xinhua usually reveals the date just
before the meeting opens and announces details once it is over.
It was held between Dec 12-14 last year and Dec 10-12 in 2010.
The government, however, may not announce the targets before
the annual parliament meeting in early March 2013.
China's annual economic growth dipped to 7.4 percent in the
third quarter, its weakest pace since the first quarter of 2009
when China was reeling from the global financial crisis.
Growth is expected to pick up in the fourth quarter
following a raft of measures, including two interest rate cuts
this year, reductions in bank reserve requirements and faster
approvals for infrastructure projects.
"China's economic outlook will be slightly brighter in 2013
- slow recovery but no sharp turn-around," Zhu Baoliang, chief
economist at State Information Centre, a top government
think-tank in Beijing, said.
Zhu expects growth to quicken slightly in 2013 to around 8
percent from 7.7 percent this year.
But analysts say Beijing will shun big stimulus next year,
even though leadership transitions in the past had been marked
by big jumps in public investments.
Expectations China might try to give a major boost to the
economy when the country's new leaders take office in March have
lifted markets on occasions. On Wednesday, mining stocks rose
after Xi talked about targeted and effective economic policies.
Beijing is wary of over stimulating the economy though, as
it is still dealing with the hangover of its 4 trillion yuan
($642.54 billion) spending binge to boost growth in the global
financial crisis that saddled local governments with piles of
In addition, Chinese leaders recognise that three decades of
double-digit expansion is over and lower growth rates are needed
to allow the economy to adjust more towards domestic driven
growth, analysts say.
Both Xi and premier-in-waiting Li Keqiang have signalled an
intention to deepen economic changes to underpin longer-term
growth, which analysts expect to include such measures as
further liberalisation of interest rates and the currency and
efforts to narrow the rich-poor divide.
Ma Jiantang, head of the National Bureau of Statistics, said
that modest economic growth will help economic restructuring as
Chinese firms are under pressures to move up the value chain.
"The current 7-8 percent speed is favorable for structural
adjustments. If we really want to adjust economic structures, we
cannot have high expectations on growth and should accept the
7-8 percent rate," Ma wrote in a recent article.