Most of the local governments that have announced their GDP targets for this year aimed lower than they did in 2013, citing the need to rebalance the economy and improve the quality of growth. Many missed their growth targets last year.
The announcements were made after the governments of twenty-eight provinces, municipalities, and autonomous regions held their annual lianghui, or meetings of the provincial legislature and political advisory body, in January. The provinces of Anhui, Hunan, and Hainan have not yet held the meetings.
The announcements show that twenty-one local governments have lowered their growth targets from last year. Six of the other seven kept the same target. The one exception is the southern province of Guangdong, which set a target of 8.5 percent, up from last year’s 8 percent.
There were only fourteen double-digit growth projections. Last year there were twenty-four.
The northeastern province of Jilin cut its projected GDP growth rate the most—from 12 to 8 percent. It was followed by Inner Mongolia, in the north, which cut its target by 3 percentage points. The provinces of Heilongjiang, in the northeast, and Ningxia, in the northwest, cut theirs by 2.5 and 2 percentage points, respectively.
These four regions fell short of their GDP growth targets last year by 3.7 to 2 percentage points. Ten others fell short of their targets by smaller amounts.
The central government will announce the target for national GDP expansion in March. Experts expect it to be around 7.5 percent. Last year, the figure was 7.7 percent, the lowest since 1999.
Analysts generally agree that the country will take a path of slower expansion as the government vows to trade some growth speed for quality. There is less agreement over how far it is willing to let the growth rate slip.
Xu Xianchun, Deputy Chief of the National Bureau of Statistics, said the government is unlikely in the short term to set the growth target lower than 7 percent because it does not want a repeat of the factory shutdowns and mass unemployment seen in 1999 and 2009, when quarterly GDP growth rates dipped below 7 percent.
Slower expansion would severely hurt companies and ordinary people unless progress is made to rebalance the economic structure so companies can have greater profit margins, said Qiu Jicheng, an economist at Cinda Securities.
New Standards
The central government has said that development cannot be simply equated to increasing economic output. Rather, efforts should focus on striking a balance between improving the quality and efficiency of economic development and preventing unwanted side effects, it said in the annual economic conference in December.
Meanwhile, the Communist Party department that oversees official appointments in all governments rewrote the standards and criteria used to evaluate the performance of officials.
The revision was intended to discourage officials from pursuing GDP growth rates by borrowing too much and damaging the environment.
Most local governments set lower growth targets this year in response to the new assessment standards, Haitong Securities analyst Jiang Chao said.
Beijing, for instance, said its officials will be evaluated more on progress made to protect the environment. It has also reduced the weight that economic growth carries in the evaluation of five suburban regions that supply water to the capital.
But investment continues to be the main driving force of economic growth. All of those local governments that have set their growth targets said they would increase investment in infrastructure and social welfare. Many also said they would encourage private investment and diversify the funding sources of municipal projects.
Niu Li, research fellow at the State Information Center, a government think tank, said many problems remain to be solved, including curbing overcapacity and defusing the risk of government debt.
Distributing wealth more equally is the key to resolving imbalances in the economic growth model, he said. Reforms should reduce the share of governments’ budgets in the national income, and increase that of urban and rural residents.
“If ordinary people do not have more money, there is no point talking about either making consumption a driving factor of growth or developing new industries,” he said.
In 2013, urban residents’ disposable income grew by an average of 7 percent year on year, the slowest pace since 2002. This means ordinary people’s income has shrunk relative to other sectors of economic output, he said.