Debate on growth and reform for China�s new plan

AFP, BEIJING: China’s leaders gather today to hash out a new Five Year Plan to battle slowing growth, and analysts say they must choose between chasing a traditional GDP target and embracing reforms such as to the “one child policy” to help the country develop its full potential.
After a decades-long boom, experts say China needs to embrace further liberalisation to avoid the “middle income trap” when developing countries fail to transform their growth model to maintain their competitive edge.
According to the government, the world’s second largest economy grew 6.9 per cent year-on-year in the third quarter, its weakest rate in six years—although independent analysts believe the true figure could be significantly lower. Implementing reforms that are necessary to ensure long-term sustainability come at a cost for current growth—a dilemma for the ruling Communist Party, whose projected aura of competence underpins its claim to legitimacy. Julian Evans-Pritchard of Capital Economics expected the growth target to be set at or only slightly below the current goal of around seven per cent. “Policymakers will struggle to meet such a high target without undermining progress on rebalancing,” he said.
Five Year Plans are a holdover from the planned economy days of the past, but still provide a broad blueprint for the country, a key driver of global growth whose performance affects companies from Australia to Zimbabwe.
China’s embrace of market economics and opening up to the rest of the world from the late 1970s transformed the livelihoods of hundreds of millions of people and propelled the country to global prominence, but growth has been slowing for several years.
Beijing has repeatedly said it wants to transition to a “new normal” of slower, more reliable growth led by domestic consumer demand, rather than the overheated exports and state investment of the past.
But in recent months questions have been raised over its ability to manage the process by stumbles such as clumsy interventions in falling stock markets.       
The Communist conclave, known as the Fifth Plenum and typically held at a Beijing hotel, brings together the ruling party’s 205-strong Central Committee and around 170 reserve members for four days from Monday to burnish the plan, although it will not be finally approved until China’s legislature meets next year.
Economic reformer Deng Xiaoping argued against ideological objections to change with the metaphor that it did not matter whether a cat was black or white, as long as it caught mice. But now the colour is critical, says Hu Angang, an economics professor at Tsinghua University who served on an experts committee that helped guide the planning process.

 

Debate on growth and reform for China�s new plan

AFP, BEIJING: Chinas leaders gather today to hash out a new Five Year Plan to battle slowing growth, and analysts say they must choose between chasing a traditional GDP target and embracing reforms such as to the one child policy to help the country develop its full potential. After a decades-long boom, experts say China needs to embrace further liberalisation to avoid the middle income trap when developing countries fail to transform their growth model to maintain their competitive edge. According to the government, the worlds second largest economy grew 6.9 per cent year-on-year in the third quarter, its weakest rate in six yearsalthough independent analysts believe the true figure could be significantly lower. Implementing reforms that are necessary to ensure long-term sustainability come at a cost for current growtha dilemma for the ruling Communist Party, whose projected aura of competence underpins its claim to legitimacy. Julian Evans-Pritchard of Capital Economics expected the growth target to be set at or only slightly below the current goal of around seven per cent. Policymakers will struggle to meet such a high target without undermining progress on rebalancing, he said. Five Year Plans are a holdover from the planned economy days of the past, but still provide a broad blueprint for the country, a key driver of global growth whose performance affects companies from Australia to Zimbabwe. Chinas embrace of market economics and opening up to the rest of the world from the late 1970s transformed the livelihoods of hundreds of millions of people and propelled the country to global prominence, but growth has been slowing for several years. Beijing has repeatedly said it wants to transition to a new normal of slower, more reliable growth led by domestic consumer demand, rather than the overheated exports and state investment of the past. But in recent months questions have been raised over its ability to manage the process by stumbles such as clumsy interventions in falling stock markets. The Communist conclave, known as the Fifth Plenum and typically held at a Beijing hotel, brings together the ruling partys 205-strong Central Committee and around 170 reserve members for four days from Monday to burnish the plan, although it will not be finally approved until Chinas legislature meets next year. Economic reformer Deng Xiaoping argued against ideological objections to change with the metaphor that it did not matter whether a cat was black or white, as long as it caught mice. But now the colour is critical, says Hu Angang, an economics professor at Tsinghua University who served on an experts committee that helped guide the planning process.