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Most of China's provinces cut growth target

Publication Date : 23-01-2014

 

More than two-thirds of China's local governments have cut economic growth targets for this year, as the top leadership cracks the whip on inflated statistics and profligate official borrowings.

Based on media reports as of yesterday, some 29 of the 31 provinces, municipalities and autonomous regions have released their 2014 targets, with 25 reporting lower figures than last year.

Another three kept targets level with the previous year, while southern Guangdong province which is restructuring itself from a manufacturing hub to a more diversified services and technology centre, has raised its target to 8.5 per cent from 8 per cent.

This looks to be the third straight year where local governments have pared down forecasts en masse, say analysts. Last year, 24 provincial governments cut their growth goals, while 28 did so in 2012 when China's economy slumped to 7.7 per cent - down from 9.3 per cent in 2011 - amid tepid global demand for exports.

"These widespread cuts reflect the new situation in China, where the new leadership stresses more balanced growth over speed," said Yunnan University professor Guo Shuhua.

Since he took power in November 2012, President Xi Jinping has been revamping local officials' performance criteria to focus their efforts on the quality of growth, while taking steps to curb China's burgeoning debt problem before it triggers a financial crisis.

His administration is set to unveil the national gross domestic product growth target at key parliamentary meetings in March. It could be kept at 7.5 per cent, the same rate since 2012 - or lowered for the first time in a decade to 7 per cent.

Observers believe local governments are pre-empting a possible cut in the national growth target this year, so as to toe the line.

Jilin in the north-east has made one of the most drastic cuts, whittling its target to 8 per cent from 12 per cent in 2013.

The lowest targets come from capital Beijing and financial city Shanghai at 7.5 per cent. Beijing dropped its goal from 8 per cent in 2013, while Shanghai kept its 2013 target level.

South-western Yunnan, which is making its first cut since 2009 with a 11 per cent target this year, is among the 13 still aiming for double-digit growth, compared with 24 doing so last year.

Double-digit growth was a regular feature during the boom times when China posted turbo-charged growth of as high as 13 per cent in 2007.

Another reason for the cautious targets this year, say analysts, is pressure from the top to report more accurate figures.

China has long seen a notoriously large gap between its national GDP and the combined GDP of local governments as officials tended to puff up output because they were appraised on economic targets. For 2013, the statistics reported so far indicate that the gap is over 2 billion yuan (US$330 million), reported the Beijing News on Tuesday.

To achieve a more accurate picture of the economy, China's statistics bureau said on Monday that it will outline plans for unified statistical standards this year.

This puts pressure on local governments to set lower targets that they can realistically deliver on.

In any case, local governments are set to see slower 2014 growth, say analysts, citing reasons such as the new performance criteria of cutting pollution and improving social welfare, which could drag down GDP in the short-term.

Also, China's push to restructure its economy away from state-led investments could lead to its slowest growth in 24 years of just 7.4 per cent this year, according to a Reuters poll.

Local governments also could find financing channels harder to tap this year as Beijing takes steps to monitor their borrowings, after Mr Xi made curbing local government debt, which has hit 17.9 trillion yuan ($2.9 trillion), a key priority this year.

Sichuan, for one, is cutting its target to 9 per cent after an investment spree reportedly financed by borrowings failed to help it hit its 2013 target of 11 per cent.

Sichuan's failure last year shows that the old path of using stimulus and loans to boost growth is no longer workable, said public finance researcher Zhang Weiqing.

"This is a cautionary tale for other provinces."

 

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