China’s policymakers are close to setting an average annual economic growth target of around 5% for the next five years, at the lower end of ranges previously considered as global risks cloud the outlook, policy sources said.
Beijing is looking to set a more flexible growth target for the 14th five-year plan to hedge against external risks caused by the pandemic and rifts with the United States, three people involved in internal discussions said following last week’s agenda-setting leadership meeting.
No decisions have yet been made as the government is still drafting detailed economic and social development goals under the five-year plan, taking their guidance from top Communist Party leaders, they said.
At last week’s meeting, President Xi Jinping and others laid out a blueprint for China’s five-year plan and key objectives for the next 15 years. They include a goal to turn China into a “high income” nation by 2025 and advance to a “moderately developed” nation by 2035, which implies income of more than $20,000 per person.
The World Bank defines “high income” countries as those with per capita gross national income of above $12,535. China’s per capita income reached $10,410 in 2019, according to the World Bank.
“Such objectives should be expressed in numbers. We still need a key indicator for economic development during the 14th five-year plan period,” said a policy source.
“We will have a GDP target and it could be around 5%.”
Government think-tanks and economists had previously made recommendations for average annual GDP growth targets, policy sources have said, which included targets of around 5%, 5-5.5% to 5-6%.
Ning Jizhe, vice head of the National Development and Reform Commission (NDRC), said last week the state planner will set detailed economic targets for 2021-2025 in line with leaders’ recommendations.
Targets are expected to be announced when the five-year plan is approved at the annual parliament meeting in early 2021.
The State Council Information Office and the NDRC did not immediately respond to Reuters’s request for comment.
Economists at Nomura said China would need to grow real GDP by about 3.9% per year between 2021 and 2025 to reach the “high income” threshold by 2025, and maintain at least 4.7% annual average GDP growth in 2021-35 to double real GDP by 2035.
The question of whether China sets a growth target for the five-year plan has been key for investors.
Amid the speculation, Xi has pledged to pursue higher quality growth and deepen reforms, which has fanned internal calls for dropping such targets.
Still, sustaining stable growth is vital for China to bypass the “middle income trap”, in which the economy stagnates at middle-income levels.
A more flexible target could help offset rising external uncertainties caused by the pandemic and tensions with the United States, policy insiders said.
“We need a more flexible target as we face relatively big uncertainties,” said a second policy source.
China’s GDP is forecast to grow just over 2% this year, its weakest pace in 44 years and likely knocking its average annual growth for 2016-2020 to below its target of more than 6.5%.
China dropped its annual GDP target in 2020 for the first time since 2002 because of the uncertainty caused by COVID-19.
Reporting by Kevin Yao; Editing by Sam Holmes