November 14, 2023
BEIJING – China should consider a proactive GDP growth target of above 5 percent in 2024 to bring economic growth back to its potential level, anchor market expectations and further stabilize the job market, leading experts said.
Fiscal expansion would be crucial in order to achieve the target, complemented by accommodative monetary moves, they said, adding that a more than 3 percent deficit-to-GDP ratio should be acceptable in 2024 if needed.
Yu Yongding, an academic member of the Chinese Academy of Social Sciences, told China Daily in an exclusive interview that it is necessary for the nation to set next year’s GDP growth target at a rate that outruns this year’s growth, as long as inflation remains subdued.
“Assuming China’s economy grows 5 percent this year, the target for 2024 should certainly exceed 5 percent,” Yu said, adding that setting a proactive growth target would motivate different sectors to unleash their full potential in promoting economic development.
The country’s GDP growth reached 5.2 percent year-on-year in the first three quarters, with the International Monetary Fund forecasting a full-year growth rate of 5.4 percent thanks to rebounding domestic demand. The IMF, however, cautioned that growth could slow in 2024 amid property market weakness and subdued external demand.
Attention has been focused on how the annual Central Economic Work Conference, which usually takes place in mid-December, will set the tone for macroeconomic policy in 2024.
Deemed as a move indicating policymakers’ emphasis on paving the way for solid growth in 2024, China’s top legislature approved additional treasury bond issuances worth 1 trillion yuan ($137.1 billion) in late October, bringing this year’s deficit-to-GDP ratio to about 3.8 percent.
It would be sensible to set next year’s deficit ratio above 3 percent, if necessary, in order to achieve the economic growth target, Yu said, stressing that an expansionary fiscal policy is crucial to stabilize growth at a level in line with the country’s potential growth rate.
The potential growth rate refers to the highest possible rate at which an economy can grow without triggering inflation, while operating at full employment.
Yu, a former member of the Monetary Policy Committee of the People’s Bank of China, the country’s central bank, added that monetary policy can play a complementary role, such as through measures to offset the rise in interest rates due to the issuance of additional treasury bonds.
As the issuance of government bonds has accelerated, the central bank said on Monday that the country’s increment in aggregate social financing — the total amount of financing to the real economy — came in at 1.85 trillion yuan in October, up by 910.8 billion yuan compared with the same period last year.
PBOC Governor Pan Gongsheng said at a forum last week that the central bank will utilize various tools to maintain reasonably ample liquidity and reduce the financing costs facing the real economy, while maintaining overall stability of such financing costs.
Li Xiaochao, former deputy head of the National Bureau of Statistics, said it would be appropriate to set next year’s GDP growth target at 5.5 percent.
“Faster growth is needed to anchor the expectations of businesses and households,” Li said, attributing their currently subdued sentiment to slower economic growth in recent years, which resulted in a tepid increase in corporate earnings and household incomes.
In an article published by the Chinese Academy of Social Sciences’ Center for City and Competitiveness, Li noted that a record high of about 11.87 million college students are estimated to graduate next year. This will also make it necessary to speed up economic growth so that more jobs can be created, he added.
Nevertheless, some other experts are more cautious and believe a target of around 5 percent, the same as this year, would be more achievable and reasonable in 2024.
Feng Jianlin, chief economist at Beijing FOST Economic Consulting, said that he expects China to set next year’s GDP growth target at about 5 percent, underpinned by plenty of policy support for the real estate sector, manufacturing investment and infrastructure investment.