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Chinese Central Planners to Determine Growth Target

by on March 3, 2014 12:50 pm BST
 

The central planners of China will announce the new growth target at this week’s meeting of the National People’s Congress. President Xi Jinping will determine, given the current economic slowdown, whether or not last year’s forecast of 7.5 percent growth expansion is appropriate.

Economist expectations range from seven to 7.5 percent in 2014. According to a Bloomberg News survey, 33 percent of economists see growth slowing down to seven percent as China battles with a impending credit crisis, exponential growth in government debt and multi-month lows in manufacturing.

UBS economist Wang Tao said “the government will maintain the target because it wants to anchor expectations and signal confidence.” Conversely, if China cannot deliver set targets, market participants are likely to react in a more volatile behavior rather than getting use to a slow and steady growth expansion. Tao agreed, saying “a lower target would be more prudent and help to reinforce the message that the government wants what it calls ‘growth without negative consequences.”

Early Sunday, the HSBC final manufacturing PMI came inline with expectations at 48.5, showing the same contraction in manufacturing seen in the bank’s flash PMI data. Services data did see a positive bounce from a record low in February.