China considering dropping numerical GDP growth target for 2020 amid coronavirus uncertainty

BEIJING (BLOOMBERG) – China’s leaders are considering the option of not setting a numerical target for economic growth this year given the uncertainty caused by the coronavirus pandemic, according to people familiar with the matter.

It would be the first time for Chinese leaders not to issue a numerical growth target in at least two decades.

What may instead be unveiled at the upcoming National People’s Congress later this month is a description of the goal for gross domestic product growth, one of the people said. Last year the target was a range of between 6 per cent and 6.5 per cent.

A final decision hasn’t been made on how to characterise the target, the people said. The government work report, which usually contains the GDP target, is typically revised repeatedly in the lead up to the conference.

The world’s second-largest economy is on track for its worst performance in the post-Mao era as the impact of shutdowns to curb the disease outbreak at home is compounded by a slump in global demand as the pandemic spreads. That has left the leadership with the choice of setting an uncomfortably low growth target, an unrealistically high one, or skipping it altogether.

Such a move would free policymakers from the obligation to issue significant stimulus to meet a certain growth level as long as employment remains stable. While China has announced credit easing policies, tax breaks and additional spending plans, the efforts are still targeted and more moderate compared with other major economies. The leadership’s caution is driven by fears of another debt blowout after total borrowing ballooned after the global financial crisis.

Full-year economic growth will likely slow to 1.8 per cent, according to the median estimate of economists surveyed by Bloomberg.

The State Council Information Office referred questions on the growth target to the National Development and Reform Commission, which did not immediately respond to a request for comment. The State Council typically leads the drafting of the work report.

Some economists, including central bank adviser Ma Jun, have publicly advocated scrapping the numerical goal because of the pressure it puts on policy makers. The nation’s top leaders also softened their tone on the importance of meeting specific growth targets at a Politburo meeting last month.

At a Politburo meeting on Wednesday (May 6), President Xi Jinping said uncertainties remain in the coronavirus outbreak as its spread overseas is yet to be controlled and some Chinese regions report further cases, the official Xinhua News Agency reported. Leaders called for reform of the nation’s disease control system and the improvement of its epidemic monitoring system.

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