China can cut its economic growth target to 7 per cent next year without hurting its labour market, the World Bank said on Wednesday even as it urged Beijing to get rid of rigid growth objectives.
At its thrice-yearly review of the Chinese economy, the World Bank warned China against carrying its “ambitious” 2014 economic growth target of 7.5 per cent into next year, saying that such a move would detract from the government’s reform plans.
After 30 years of breakneck, double-digit economic expansion that lifted millions of Chinese from abject poverty but also polluted the nation’s air, land and waterways, China wants to retool its economy to generate slower but better-quality growth.
But the quest to let market forces supplant state planning in running the world’s second-biggest economy would require China to live with less frenzied economic growth rates and income rises, a point stressed by the World Bank.
"Our policy message is the focus should be on reforms rather than meeting specific growth targets," Karlis Smits, a senior economist at the World Bank office in Beijing, told reporters at a media briefing.
“In our view, an indicative target of around 7 per cent for 2015 would meet ... the kind of indicative growth that is needed to maintain stability in the labour market,” he said.
The bank's message on employment would appeal to its audience in Beijing, where Communist Party leaders who are wary of social unrest have said that having a healthy job market is a top policy priority.
Hurt by softening domestic demand as China’s property market sags and investment growth wanes, the Chinese economy has had a rough ride this year, even though the government and the central bank have rolled out a series of support measures to avert an even sharper slowdown.
The economy grew at its slowest pace since the global financial crisis in the September quarter and is expected by analysts to miss China’s official growth target for the first time in 15 years.
The World Bank and other analysts expect the economy to expand by 7.4 per cent this year, the slackest in 24 years, and a hair’s breadth from the 7.5 per cent target.
And the World Bank made clear that it would not welcome a similar growth target from China next year.
“A prevalent concern is that a policy focused on meeting an ambitious growth target, similar to one set for 2014, would require macroeconomic policies to remain oriented to support domestic demand rather than on reforms,” it said in a report.
The World Bank's comments echoed those of the International Monetary Fund, which said in July that Beijing should set a growth target of 6.5-7 per cent for 2015 and refrain from stimulus measures unless the economy threatens to slow sharply from that level.
Beijing is not expected to announce its 2015 target until next March.
Reuters
