By Jonathan Cheng
BEIJING -- By ditching a formal economic growth target for this
year, China's leaders are acknowledging continued global
uncertainty amid the coronavirus pandemic.
But the move could also mark the beginning of the end for a key
performance metric that has long undergirded policy decisions for
Chinese government officials.
The world economy is likely to feel the impact as Beijing
accelerates its shift away from a decadeslong fixation on achieving
a specific, rapid pace of economic expansion to a focus on other
goals, though at a slower growth rate. This transition will drag on
China's demand for the world's services, finished goods and natural
resources.
Premier Li Keqiang said in May that China would forgo this
year's annual growth target. Over the course of the past two and a
half decades of blistering growth -- including eight years in
double digits and 6.1% last year -- the annual target for gross
domestic output growth served as an explicit manifestation of the
implicit bargain between Beijing and the public: acquiescence on
many political and social issues in exchange for rising
prosperity.
As growth has tapered off and as public demands for other
improvements have grown, Chinese officials have in recent years
been expected to fulfill an increasingly wide range of goals,
including ensuring social stability, keeping debt in check,
eliminating poverty and cleaning up the environment.
But Beijing still demanded regional officials achieve a growth
benchmark, which encouraged them to prioritize certain kinds of
policies: attracting investment and encouraging real-estate
development and infrastructure.
Without a growth target, these officials will, for the first
time in decades, be judged by criteria that don't include
maximizing growth.
At least for the rest of this year, chief among those new
benchmarks will be their ability to keep coronavirus infection
counts at or near zero -- a demand that could require restrictions
on work, travel and other activities that fuel economic growth.
As Mr. Li himself acknowledged Thursday at a press conference,
referring to the tasks of spurring the economy and containing the
pandemic: "I'm afraid there's a level of conflict of interest
between these two goals."
When six new infections were confirmed recently at a housing
complex in the city of Wuhan -- suggesting the coronavirus's
possible re-emergence in the pandemic's initial epicenter -- local
authorities fired the official in charge of the complex and ordered
testing of the city's 11 million people.
Similarly, when several dozen cases were confirmed in China's
northeast earlier in May, authorities promptly locked down the
area, ordered residents to stay home and replaced officials. One of
China's vice premiers hurried over from Beijing to chide local
cadres for acting too slowly.
That new incentive structure -- out with the growth target, in
with pandemic prevention -- portends a broader shift in the senior
leadership's thinking on the centrality of economic growth.
Recently, officials in some underperforming provinces haven't
been removed or appeared overly concerned after missing GDP targets
for several consecutive years, notes Houze Song, a research fellow
at the Chicago-based Paulson Institute's MacroPolo think tank.
"The marginalization of the GDP target seems to be a trend," Mr.
Song said. Dropping it for 2020 "makes it more likely that in
future years they will abandon the GDP target," he said -- for
good.
Beginning with the introduction of a new unemployment survey in
2018, jobs have been a particular focus for China's
stability-minded leaders, arguably outweighing the importance of
the GDP figure, says Andrew Fennell, lead analyst for Hong Kong and
China at Fitch Ratings.
Scrapping the GDP target this year, he said, "is a recognition
of realities, but it's also a culmination of changes in the
incentive structure."
China's top leader, Xi Jinping, told delegates to China's
rubber-stamp legislature earlier in May that, if not for the
pandemic, the annual growth target would have been around 6%. But
with the pandemic, he said, according to state media reports, "some
things are simply beyond our control."
"The global economy is doomed to fall into recession," Mr. Xi
was quoted saying. "The focus should not be placed on the GDP
growth rate."
In line with the apparent comfort with slower growth, Beijing
announced a much milder stimulus effort than the large-scale fiscal
and monetary packages that characterized its response to downturns
in 2008 and 2015.
Economists say, given the job-creation targets and the fiscal
budget deficit, Beijing is implying growth of less than 2% this
year.
Of course, growth still matters. The two economic priorities
Beijing is touting this year instead of a specific GDP goal --
ensuring employment and eliminating absolute poverty -- depend, to
a large degree, on rising output.
"You can't achieve all those things without some level of
growth," says Mr. Fennell of Fitch Ratings.
But Mr. Li, the premier, told reporters Thursday that China was
less interested in a particular growth rate than in what he called
"higher-quality development."
"We believe development still holds the key and is the
foundation for resolving all of the problems in China today," he
said.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
(END) Dow Jones Newswires
May 31, 2020 10:14 ET (14:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.