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Economic Pulse 2013 GDP growth target unchanged at 7.5% (03/06/2013)

Updated: 2013/3/6 10:56:00

BEIJING - The Chinese government announced Tuesday that its GDP growth target will remain around 7.5 percent this year to leave room for economic restructuring.

The target is intended to help create jobs and improve people´s well-being, Premier Wen Jiabao said while delivering his last government work report to the opening session of 12th National People´s Congress (NPC), China´s top legislature.

This marks the second consecutive year for the world´s second-largest economy to target 7.5-percent growth. In 2012, the government cut its growth forecast from 8 percent for the first time in eight years.

Wen warned of the profound and persisting impact of the global financial crisis, as well as the unstable recovery of the world economy, as major threats to China´s economic growth.

However, the premier cited the considerably increased capacity of China´s manufacturing industry, significantly improved infrastructure, a high savings rate and a large workforce as favorable factors that will sustain development.

"In light of comprehensive considerations, we deem it necessary and appropriate to set this year´s target for economic growth at 7.5 percent, a goal that we will have to work hard to attain," Wen told nearly 3,000 national legislators attending the NPC session.

"We must maintain a proper level of economic growth in order to provide necessary conditions for creating jobs and improving people´s well-being. We must ensure that economic growth is in accordance with the potential economic growth rate," Wen said.

China´s economic growth eased further to a 13-year low of 7.8 percent in 2012 from 9.3 percent in 2011 and 10.3 percent in 2010. The country´s GDP stood at 51.9 trillion yuan (about 8.3 trillion U.S. dollars) last year.

Earlier in 2011, the government announced that it would target annual GDP growth of 7 percent from 2011 to 2015.

Maintaining a slower growth target is intended to shift the government´s focus toward accelerating the change of China´s growth model restructuring the economy and improving the quality and performance of economic growth so as to promote sustained and healthy economic development, the premier noted.

Rapid growth over?

Some analysts fear that rapid growth will no longer be possible for China due to domestic and external uncertainties.

The Chinese economy has expanded by an average of 9.3 percent annually over the past five years.

But Fan Gang, an economist and former advisor to China´s central bank, said it is too early to come to that conclusion.

"China is far from saying goodbye to rapid growth, but rapid growth is not necessarily equivalent to overheated growth or two-digit growth highlighted by soaring inflation and asset bubbles," Fan said.

An ideal growth rate for China would be around 8 percent, said Fan, who once served as an economic advisor to China´s Cabinet.

"From this perspective, I see no problem for China to maintain rapid growth for another 20 or 30 years," said Fan.

Wang Yiming, deputy director of the Macroeconomic Research Institute under the National Development and Reform Commission, said China´s potential economic growth rate has dropped to between 7 and 8 percent.

"Therefore, the 7.5-percent target this year is in accordance with the potential rate," Wang said.

As promised by the Communist Party of China last autumn, China will double its GDP in 2020 in comparison to 2010, which will require the country to keep an average annual growth rate of 7.2 percent during the period.

Lower inflation goal

The government has also decided to rein in inflation more decisively by lowering the control target for this year´s consumer price index (CPI) increase to around 3.5 percent, compared with 4 percent targeted last year.

"China is still under considerable inflationary pressure this year and maintaining price stability has always been an important macroeconomic control target," Wen said.

Apart from upward pressure on the prices of land, labor, agricultural products and services, China is facing imported inflationary pressure resulting from quantitative easing policies in major developed countries, he noted.

The inflation control target is intended to leave room for adjusting the prices of energy and resources after taking into account the carry-over effect of consumer price rises in 2012, which will contribute about one percentage point to this year´s inflation rate.

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