In the past few months, China’s central government lowered economic growth targets that were exceptionally high for decades. According to the Beijing News, 27 out of 31 provinces missed their growth targets mandated by the central government last year. Over the past few decades, the Chinese government issued high growth standards for each province, most of which were met or exceeded. Now, the government is reconciled to the fact that substantial growth over the entire economy is not feasible or maintainable.
Every province, with the exception of Tibet, cut their economic growth goals this year. Tibet is one of the poorest provinces in China and could benefit from industrial growth. Other provinces, like those in north China, will see a drastic slow down of growth to a normal, modernized level. Growth estimates for the country as a whole are now near 7%.
Now one of the most modernized economies in the world, economists attribute this economic deceleration in China to natural causes. Government officials recognize this trend and are adjusting their predictions accordingly.
Source: http://blogs.wsj.com/chinarealtime/2015/01/30/chinas-provinces-lower-their-sights-after-most-miss-their-economic-targets/
I’ve not looked at the WSJ blog recently; good to be reminded of it.
Think back to “Macro” (Econ 102 or Econ 211): what might indicate growth is “too fast”? Wouldn’t that normally be inflation? So for a followup post, check out that angle.
A separate issue is political economy. Provincial and local leaders were evaluated in part on their ability to “deliver the goods” — growth — in their domain. Since they could only influence a limited number of local economic variables, that meant a strong temptation to overdo it. An example we’ll see in the 3rd part of Hessler, in the Miller book and in Ma and Adams is local government sponsored real estate development. Of course it also meant they had a strong incentive to cook the books: in some years the growth of GDP reported by the central government statistical agency [link in the blogroll on the right] was lower than the growth reported by ANY province — with honest reporting it should be roughly equal to the weighted average of provincial growth rates. Ending growth as a target can lead to better statistics as a by-product, and such statistics are central to business investment planning.